Part A A $400,000 investment in a surface mount placement machine produces pre-tax revenue of $47980/yr for 10 years, at which time the SMP machine has a salvage value of $100,000. Based on a 25% income tax rate, a 12% after tax MARR, & SLN depreciation, what will be the ATPW (After Tax Present Worth) of the investment? $
Part B Brian a Temple graduate suggests using a 6% bond issue to pay for the investment from the previous example. What will the ATPW be? $
(remember that a bond pays interest only each year and is repaid in full at the end of the term. I made a typo in the income range. If your income is less than 54000 your tax liability will be negative. This will not change the solution, and it makes sense because a negative tax liability does increase income by lowering the taxes paid on other income.