AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment equals=$356,000; market value at end of year six equals=$127,000; annual revenus = $127,000; annual expenses = $10,000; equipment life equals=6 years; effective income tax rate equals=22%; and after-tax MARRequals=12% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment's ATCFs.
AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment equals=$356,000; market value at end of year six equals=$127,000; annual revenus = $127,000; annual expenses = $10,000; equipment life equals=6 years; effective income tax rate equals=22%; and after-tax MARRequals=12% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment's ATCFs.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers.
a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital
depreciation will be used with a five-year recovery period.
investment equals=$356,000;
market value at end of year
six equals=$127,000;
annual
revenus = $127,000;
annual
expenses = $10,000;
equipment
life equals=6
years; effective income tax
rate equals=22%;
and after-tax
MARRequals=12%
per year. MACRS b. Compute the PW of the equipment's ATCFs.
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