firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%, and its after-tax MARR is 18%. What is the present worth of the project?
firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%, and its after-tax MARR is 18%. What is the present worth of the project?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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![firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time
is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and
maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%,
and its after-tax MARR is 18%.
What is the present worth of the project?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffbec951b-e14a-4f90-9374-e433d3825e7a%2F9a4fff35-5d31-4b92-bcfe-6059abd9724c%2Fnzprxag_processed.jpeg&w=3840&q=75)
Transcribed Image Text:firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time
is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and
maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%,
and its after-tax MARR is 18%.
What is the present worth of the project?
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