Question 13.10: Some new production machinery has a first cost of $100,000 a...
Some new production machinery has a first cost of $100,000 and a useful life of 10 years. Its estimated operating and maintenance (O&M) costs are $10,000 the first year, which will increase annually by $4000. The asset’s before-tax market value will be $50,000 at the end of the first year and then will decrease by $5000 annually. This property is a 7-year MACRS property. The company uses a 6% after-tax MARR and is subject to a combined federal/state tax rate of 40%.
Calculate the after-tax cash flows.
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