Determine the after-tax equivalent present worth

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Reference no: EM13832720

A certain engine lathe can be purchased for $270,000 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 $180,000 (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 4.5% per year. Labor, materials, and utilities totaling $45,000 (time 0 dollars) per year are all expected to increase at 8% per year. The firm’s effective income tax rate is 45%, and its after-tax MARR (im) is 22% per year. Determine the after-tax equivalent present worth. Use life of three years and work to the nearest dollar.

Reference no: EM13832720

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