Integrated patters on manufactured carpet squares

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Reference no: EM131525798

This is part of a review for an upcoming exam. So please explain in detail not just the answer.

1) Milliken uses a digitally controlled dyer for placing intricate and integrated patters on manufactured carpet squares for home and commercial use. It is purchased for $400,000. It is expected to last 8 years and have a salvage value of $30,000. Increased net income due to this dyer is $95,000 per year. Milliken’s tax rate is 40 percent, and the after-tax MARR is 12 percent. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW using MACRS and 5 year property class.

2) Suppose Milliken has an opportunity with similar cash flows to those in problem 1 for a digitally controlled dyer, although there are no depreciable items. They can invest in a marketing study by a blue-ribbon consultancy costing $400,000. Expected net returns are $95,000 per year over 7 years and $125,000 during the eighth year. Milliken’s tax rate is 40 percent, and the after-tax MaRR is 12 percent.

a. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW.

b. Compare the results of Part A with those of Problem 1. Explain the differences.

Reference no: EM131525798

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