Hello - I need help with the following question: \"A computerized machining cent

Question

Hello - I need help with the following question:

"A computerized machining center has been proposed for a small tool manufacturing company. If the new system, which costs $125,000, is installed, it will generate annual revenues of $100,000 and will require $20,000 in annual labor, $12,000 in annual material expenses, and another $8,000 in annual overhead (power and utility) expenses. The automation facility would be classified as a seven-year MACRS property. The company is expected to phase out the facility at the end of five years, at which time it will be sold for $50,000.

Find the year-by-year after-tax net cash flow for the project at a 40% tax rate based on the net income and determine the after tax net present value of the project at the company

Explanation / Answer

MACRS Depreciation Schedules for Personal Properties with Half-Year Convention,
Declining-Balance Method

Recover
y Year

3-Year
Propert
y
33.33
44.45
14.81 *
7.41

5-Year
Propert
y
20
32
19.2
11.52 *
11.52
5.76

7-Year
Propert
y
14.29
24.49
17.49
12.49
8.93 *
8.92
8.93
4.46

10-Year
Propert
y
10
18
14.4
11.52
9.22
7.37
6.55 *
6.55
6.56
6.55
3.28

15-Year
Propert
y
5
9.5
8.55
7.7
6.93
6.23
5.90 *
5.9
5.91
5.9
5.91
5.9
5.91
5.9
5.91
2.95

20-Year
Propert
y
3.75
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462 *
4.461
4.462
4.461
4.462
4.461
4.462
4.461
4.462
4.461
4.462
4.461
2.231

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
* Year
to
switch
from
declinin
g
balance
to
straight
line

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