Question

3) An asset that lasts 8 years costs $300,000 today and costs $15,000 per yea 8 years. The tax rate is 20%, and the discount rate is 9%. What is the equiva

Answer 1

F G H 0227 : X r fix =F226/8 2 A B C D E Operating Deprecia Tax @20% Cash outflows (Tax saved- 225 Year costs tion Total saved on costs Operating costs) 226 0 300,000 227 1 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 228 2 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 229 3 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 4 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 231 5 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 232 6 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 233 7 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 234 8 $ 15,000 $37,500 $ 52,500 $ 10,500 $ 4,500 235 Total present value of costs 237 :PVIFA(9%,8) PVIF@9% Present value 1.000 $ 300,000 0.917 $ 4,128 0.842 $ 3,788 0.772 $ 3,475 0.708 $ 3,188 0.650 $ 2,925 0.596 $ 2,683 0.547 $ 2,462 0.502 $ 2,258 230 236 324,907 5.535 238 Equivalent annual cost $ 58,702

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