Homework Answers
| Time line | 0 | 1 | 2 | 3 | 4 | 5 | 6 | |||
| Cost of new machine | -60000 | |||||||||
| =Initial Investment outlay | -60000 | |||||||||
| 5 years MACR rate | 20.00% | 32.00% | 19.20% | 11.52% | 11.52% | 5.76% | 0.00% | |||
| Profits | 22000 | 22000 | 22000 | 22000 | 22000 | 22000 | ||||
| -Depreciation | =Cost of machine*MACR% | -12000 | -19200 | -11520 | -6912 | -6912 | -3456 | 0 | =Salvage Value | |
| =Pretax cash flows | 10000 | 2800 | 10480 | 15088 | 15088 | 18544 | ||||
| -taxes | =(Pretax cash flows)*(1-tax) | 6000 | 1680 | 6288 | 9052.8 | 9052.8 | 11126.4 | |||
| +Depreciation | 12000 | 19200 | 11520 | 6912 | 6912 | 3456 | ||||
| =after tax operating cash flow | 18000 | 20880 | 17808 | 15964.8 | 15964.8 | 14582.4 | ||||
| +Tax shield on salvage book value | =Salvage value * tax rate | 0 | ||||||||
| =Terminal year after tax cash flows | 0 | |||||||||
| Total Cash flow for the period | -60000 | 18000 | 20880 | 17808 | 15964.8 | 15964.8 | 14582.4 | |||
| Discount factor= | (1+discount rate)^corresponding period | 1 | 1.15 | 1.3225 | 1.520875 | 1.7490063 | 2.0113572 | 2.3130608 | ||
| Discounted CF= | Cashflow/discount factor | -60000 | 15652.17391 | 15788.27977 | 11709.04907 | 9127.9262 | 7937.3271 | 6304.3739 | ||
| NPV= | Sum of discounted CF= | 6519.13 | ||||||||
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Problem 10-1 (algorithmic) Question Help A firm is considering purchasing a machine that costs $60,000. It...
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Solve for A and B, Engineering Economy
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please solve it right!
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