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A certain engine lathe can be purchased for $270,000 and depreciated over three years to a zero salvage value with the SL method. This machine will produce metal parts that will generate revenues of $180,000 (time zero dollars) per year. It is a policy of the company that the annual revenues will be increased each year to keep pace by the general inflation rate, which is expected to average 4.5% per year. Labor, materials, and utilities totalling $45,000 (time 0 dollars) per year are all expected to increase at 8 percent per year. The firm’s effective income tax rate is 45 percent, and its after-tax MARR (im) is 22 percent per year. Determine the after-tax equivalent present worth. Use life of three years and work to the nearest dollar

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91224033

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