Calculate the AW value for the Design A. AW_A(8%)=$___(Round to the nearest hund
ID: 2800013 • Letter: C
Question
Calculate the AW value for the Design A.
AW_A(8%)=$___(Round to the nearest hundreds.)
Calculate the AW value for the Design B.
AW_B(8%)=$___(Round to the nearest hundreds.)
A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 38%, and MACRS depreciation is used. If the desired after-tax return on investment is 8% per year, which design should be chosen? Capital investment MV at end of useful life Annual revenues less expenses MACRS property class Useful life Design A $1,260,000 $1,070,000 $170,000 years 7 years Design B $2,070,000 $1,100,000 $450.000 5 years 6 years Click the icon to view the More Info Click the icon to view the . Calculate the AW value for the AWA(8%,-(Round to GDS Recovery Rates (rk) Year 5-year Property Class 0.2000 0.3200 0.1920 0.1152 0.1152 0.0576 2 4 6 Enter vour answer in the ans PrintDone heck AnswerExplanation / Answer
Design A Year Capital flow EBDT Depn EBT Tax-38% PAT OCF FCF Disc. Fact. Disc. Cash flow 0 -12,60,000 -12,60,000 -12,60,000 1 170000 2,52,000 -82,000 -31,160 -50,840 2,01,160 2,01,160 0.92593 1,86,259 2 170000 4,03,200 -2,33,200 -88,616 -1,44,584 2,58,616 2,58,616 0.85734 2,21,722 3 170000 2,41,920 -71,920 -27,330 -44,590 1,97,330 1,97,330 0.79383 1,56,647 4 170000 1,45,152 24,848 9,442 15,406 1,60,558 1,60,558 0.73503 1,18,015 5 170000 1,45,152 24,848 9,442 15,406 1,60,558 1,60,558 0.68058 1,09,273 6 170000 72,576 97,424 37,021 60,403 1,32,979 1,32,979 0.63017 83,799 7 6,63,400 170000 - 1,70,000 64,600 1,05,400 1,05,400 7,68,800 0.58349 4,48,587 Total 5.20637 64,302 Annual Worth 12,351 Calculation of MV value after tax MV Value 10,70,000 Less: Tax at 38% 4,06,600 Inflow after tax 6,63,400 Calculation of Depn Year Rate Depn Book Value 0 12,60,000 1 20.00% 2,52,000 10,08,000 2 32.00% 4,03,200 6,04,800 3 19.20% 2,41,920 3,62,880 4 11.52% 1,45,152 2,17,728 5 11.52% 1,45,152 72,576 6 5.76% 72,576 - Design B Year Capital flow EBDT Depn EBT Tax-38% PAT OCF FCF Disc. Fact. Disc. Cash flow 0 -20,70,000 -20,70,000 -20,70,000 1 450000 4,14,000 36,000 13,680 22,320 4,36,320 4,36,320 0.92593 4,04,000 2 450000 6,62,400 -2,12,400 -80,712 -1,31,688 5,30,712 5,30,712 0.85734 4,55,000 3 450000 3,97,440 52,560 19,973 32,587 4,30,027 4,30,027 0.79383 3,41,369 4 450000 2,38,464 2,11,536 80,384 1,31,152 3,69,616 3,69,616 0.73503 2,71,679 5 450000 2,38,464 2,11,536 80,384 1,31,152 3,69,616 3,69,616 0.68058 2,51,555 6 6,82,000 450000 1,19,232 3,30,768 1,25,692 2,05,076 3,24,308 10,06,308 0.63017 6,34,145 Total 4.62288 2,87,748 Annual Worth 62,244 Calculation of MV value after tax MV Value 11,00,000 Less: Tax at 38% 4,18,000 Inflow after tax 6,82,000 Calculation of Depn Year Rate Depn Book Value 0 20,70,000 1 20.00% 4,14,000 16,56,000 2 32.00% 6,62,400 9,93,600 3 19.20% 3,97,440 5,96,160 4 11.52% 2,38,464 3,57,696 5 11.52% 2,38,464 1,19,232 6 5.76% 1,19,232 -
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