MGMT310_lecture19

MGMT310_lecture19 - EAC EACrevisited:nowlet...

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C revisited: now let’s incorporate taxes! EAC revisited: now let s incorporate taxes! achine B Machine A 3 year useful life Price: $12,000 Machine B 5 year useful life Price: $25,000 $5000 maintenance / yr Dep. Expense = $4,000/yr $2000 maintenance / yr Dep. Expense = $5,000/yr occ = 10%, relevant marginal tax rate = 30% Cannot sell machines once useful life is over. What is the equivalent annual cost (EAC) of each machine?
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oming up with a id price Coming up with a bid price The Army needs new tanks and is seeking bids. The Army will enter a contract with the lowest bidder to purchase 5 tanks per year for the next three years. Suppose you are a tank manufacturer. To fill this order, you would need to purchase an additional $3M worth of equipment, which you expect to sell for $600K once the project is over. You will depreciate the machine at $1M per year for the next three years. addition you will need to increase your NWC by $500K (don’t forget: you will In addition, you will need to increase your NWC by $500K (don t forget: you will
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MGMT310_lecture19 - EAC EACrevisited:nowlet...

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