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Determine after-tax cash flow for each year of operation

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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.

EOY

BCTF

MACRS-GDS Deduction

Taxable Income

Tax

ATCF

0

 

 

 

 

 

1

 

 

 

 

 

2

 

 

 

 

 

3

 

 

 

 

 

4

 

 

 

 

 

b) Based on the present worth measures, determine if the company should consider the purchase of this new equipment further?

Reference no: EM132117645

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