Pertinent information for alternatives are shown below if the after-tax MARR is

Question

Pertinent information for alternatives are shown below if the after-tax MARR is 8% per year, and effective income tax rate=50%. The GI-OE estimate is made for 7 year. However, MACRS depreciation is used over 5-year recovery period. Hint: Solve the problem in tabular format and then answer the following question. Alt. A Alt.B First cost, -50,000 -30,000 Salvage Value, 4000 3,000 GI-OE, 8,000 6,000 Life, years 7 7 Recovery period, years 5 5 Question#5: The CFAT of machine B at the end of year 7 is less than 5000. True or False? Question#4: The CFAT of machine A at the end of year 6 is greater than 6,000. True or False? Question#3: The CFAT of machine B at the end of year 4 is greater than 4000. True or False? Question#2: The TI (taxable income) of machine B at the end of year 1 is greater than 1000. True or False? Question#1: The book value of machine A at the end of year 2 is less than than 20,000. True or False?

Explanation / Answer

5. true 64.true 3.false 2.true 1.false

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