Is the investment worthwhile when the after-tax marr

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The XYZ Semiconductor Company is attempting to evaluate the profitability of adding another integrated circuit production line to its present operations. The company would need to purchase two or more acres of land for Php 275,000 (total). The facility would cost Php 60,000,000 and have no net MV at the end of five years. The facility could be depreciated using a recovery period of five years. An increment of working capital would be required, and its estimated amount is Php 10,000,000. Gross income is expected to increase by Php 30,000,000 per year for five years, and operating expenses are estimated to be Php 8,000,000 per year for five years. The firm's effective income tax rate is 40%.

Question (a) Set up a table and determine the ATCF for this project.

Question (b) What is the NIAT in tear three?

Question (c) Is the investment worthwhile when the after-tax MARR is 12% per year?

Reference no: EM132565787

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