Depreciated over three years to zero salvage value

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Reference no: EM131558767

A certain engine lathe can be purchased for ?$150,000 and depreciated over three years to a zero salvage value with the SL method. This machine will produce metal parts that will generate revenues of ?$85,000 ?(time zero? dollars) per year. It is a policy of the company that the annual revenues will be increased each year to keep pace with the general inflation? rate, which is expected to average 5?% per year ?(f=0.05?). ?Labor, materials, and utilities totaling?$25,000 ?(time 0? dollars) per year are all expected to increase at 8?% per year. The? firm's effective income tax rate is 50?%, and its? after-tax MARR ?(im?) is 28?% per year. Perform an? actual-dollar (A?$) analysis and determine the annual ATCFs of the preceding investment opportunity. Use a life of three years. What interest rate would be used for discounting? purposes? Determine the ATCF for years 0, 1, 2, & 3.

Reference no: EM131558767

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