Assignment Question -
A company is considering purchasing new equipment that is expected to generate an additional income of $50,000 annually. The equipment will have an initial cost of $75,000 and estimated annual operating and maintenance costs of $30,000. Its estimated salvage value at the end of its useful life of 4 years will be $15,000. The equipment is a MACRS-GDS 3-year property for calculating depreciation deductions. The effective tax rate is 40%. Use an after-tax MARR of 10% per year compounded annually.
a) For this information, determine the after-tax cash flow for each year of operation.
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EOY
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BCTF
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MACRS-GDS Deduction
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Taxable Income
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Tax
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ATCF
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0
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1
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2
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3
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4
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b) Based on the present worth measures, determine if the company should consider the purchase of this new equipment further?