ISE 460 econ serv life 14.3

ISE 460 econ serv life 14.3 - ISE460 Spring 2007 Chapter 14...

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ISE460 Spring 2007 Chapter 14 09/09/2009 Page 1 Example 14.1 Original Cost $20,000 2 year market value $10,000 MACRS 7 years Trade in $10,000 Relevant cost A B C D 1 2 3 4 5
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Chapter 15 09/09/2009 Page 2 Example 15.2 Note: Book ignored depreciation! Keep the defender 7 MACRS Market Value $10,000 Tax Rate 40% MARR 12% n -2 -1 0 1 2 3 Financial data (cost information) 1 Depreciation $2,857 $4,898 $3,499 $2,499 $892 2 Book value $20,000 $17,143 $12,245 $8,746 $6,247 $5,355 3 Salvage Value $2,500 4 (Loss) or gain from Sale $(2,855) 5 Repair Cost $5,000 6 O&M costs $8,000 $8,000 $8,000 Income Statement 7 Revenue 8 Expense 9 Depreciation $3,499 $2,499 $892 I7 10 $8,000 $8,000 $8,000 11 Taxable Income $(11,499) $(10,499) $(8,892) 12 Income taxes $(4,599) $(4,200) $(3,557) $C$4*I20 13 Net Income $(6,899) $(6,299) $(5,335) I20-I21 Cash Flow Statement 14 Operating activities Net Income $(6,899) $(6,299) $(5,335) Depreciation $3,499 $2,499 $892 15 Investment Activities Investment 16 Salvage Value $2,500 17 Gains Tax $1,142 (I7-I8)*C3 18 Net Cash Flow $(3,401) $(3,800) $(801) PW ($6,636.07) NPV(F4,G32:I32) A B C D E F G H I
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ISE 460 econ serv life 14.3 - ISE460 Spring 2007 Chapter 14...

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