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MS303_Excel_Solutions_Ekders

# MS303_Excel_Solutions_Ekders - 7.36 Capital investment...

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7.36 Plastic Copper Capital investment \$10,000 \$15,000 Useful life (years) 5 10 \$5,000 \$10,000 Annual expenses \$500 \$200 \$0 \$0 Income-tax rate (t) 40% After-tax MARR 10% Alternative A: Plastic (A) (B) (C)=(A)-(B) (D)=-t(C) (E)=(A)+(D) AW (10%) EOY BTCF Depr. TI T (40%) ATCF 0 -\$10,000 -- -- -- -\$10,000 -\$2,638 1 - 5 -\$500 \$1,000 -\$1,500 \$600 \$100 \$100 5 \$0 -- -\$5,000 \$2,000 \$2,000 \$328 -\$2,210 Minimize Cost: Select Alternative B (A) (B) (C)=(A)-(B) (D)=-t(C) (E)=(A)+(D) AW (10%) EOY BTCF Depr. TI T (40%) ATCF 0 -\$15,000 -- -- -- -\$15,000 -\$2,441 1 - 10 -\$200 \$500 -\$700 \$280 \$80 \$80 10 \$0 -- -\$10,000 \$4,000 \$4,000 \$251 -\$2,110 Salvage value at the end of useful life Market value at the end of useful life Alternative B : Copper

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7.58 (a) Capital investment \$10,000,000 (SL depreciation) Market Value \$0 Annual Savings \$4,000,000 Useful Life 4 Income-tax rate (t) 40% After-tax MARR 15% EOY BTCF Depr. TI T (40%) ATCF 0 -\$10,000,000 -- -- -- -\$10,000,000 1 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 2 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 3 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 4 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 4 -- -- -- -- -- PW -\$293,073.57 IRR 13.54% (b) Capital investment \$10,000,000 (SL depreciation) Market Value X Annual Savings \$4,000,000 Useful Life 4 Income-tax rate (t) 40% After-tax MARR 15% EOY BTCF Depr. TI T (40%) ATCF 0 -\$10,000,000 -- -- -- -\$10,000,000 1 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 2 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 3 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 4 \$4,000,000 \$2,500,000 \$1,500,000 -\$600,000 \$3,400,000 4 X -- X -0,4*X 0,6*X PW* -\$293,073.57 FW* -\$512,587.50 FW= -512.587,50 + 0,6*X >= 0 Market Value >= \$854,312.50 PW* and FW* do not include the market value at the end of year 4 If a market value of at least 854.312,50 could be expected at the end of year 4, this investment would
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MS303_Excel_Solutions_Ekders - 7.36 Capital investment...

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