question archive A machine can be purchased for $225,000 and depreciated over three years to a book value of $0 using the Straight Line method
A machine can be purchased for $225,000 and depreciated over three years to a book value of $0 using the Straight Line method
Subject:FinancePrice: Bought3
A machine can be purchased for $225,000 and depreciated over three years to a book value of $0 using the Straight Line method. The machine will generate revenues of $65,000 (time zero dollars) per year, with these revenues starting at the end of year one and increasing by 10% each year. The Operation and Maintenance (O&M) costs are expected to total $15,000 (time zero dollars) per year and are expected to increase by 9% per year. The firm’s effective tax rate is 30%, and its after-tax MARR (im) is 26% per year. (a) Perform an actual-dollar (A$) analysis and determine the annual After Tax Cash Flows of the above investment opportunity. Use a life of three years and work to the nearest dollar. (3 marks) (b) What interest rate would be used for discounting purpose? (1 mark) (c) Based on your results in (a) and (b), what is the Present Worth of the machine? (1 mark?
