Problem
(Refer to Problem 13.16.) The R&D lab of Big Tech Manufacturing will purchase a $1.8M process simulator. It will be replaced at the end of year 5 by a newer model. Inflation will be 4% over the 5 years. Use MACRS and a tax rate of 40%. The simulator's salvage value is $.5M.
(a) What is the after-tax cash flow in year 5 in year-0 dollars due to the simulator?
(b) What is the equipment's after-tax EAC in year-0 dollars over the 5 years if the interest rate is 10%?
Problem 16
The R&D lab of Big Tech Manufacturing will purchase a $1.8M process simulator. It will be replaced at the end of year 5 by a newer model. Use MACRS and a tax rate of 40%. The simulator's salvage value is $.5M.
a) What is the ATCF due to the simulator in year 5?
(b) What is the equipment's after-tax EAC over the 5 years if the interest rate is 10%?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.