Any help with this value design question would be appreciated. Youngblood Enterp

Question

Any help with this value design question would be appreciated.

Youngblood Enterprises owns an Electric utility steam production plant in Monroeville, PA and purchased the plant for $80,500.000 and expended S2.000.000 for plant assembly. Property taxes are S250,000 per year Therevenue generated will result in an increase of evenue of 11.00,000, with associated increased expenses of $3.500,000, each year. Youngblood Enterprises's effective tax rate is 39%. The project's MARR-13%. IDetermine the Asset Class 2 GDS Recovery Period What is the ATCF for this project each year of 3 service of the asset? What is the PW of the ATCF if the after tax 4 MARR 13% ? What is Equivalent Annual Worth on the 5ATCFs of this project? Based an the Annual Worth of the ATCFs, should this project be undertaken? (Justify your 6 answer; cite the decision rule and page#).

Explanation / Answer

Year 0 1 Plant cost 80500000 Assembly cost 2000000 Revenue 11000000 Cost 3500000 Property tax 250000 Before tax cash flow 7250000 Tax rate 39% After tax cash flow 4422500 2 Total initial cash outlay 8,25,00,000.00 Cash inflow each year 4422500 Recovery period 18.65 Years 3 ACTF 4422500 4 After tax MARR 13% PW of ACTF 3,40,19,230.77 Assuming ACTF will continue till perpetuity. So PW = ACTF/MARR 5 Equivalent Annual worth -4,84,80,769.23 6 Since the equivalent annual worth is negative we should not take this project Year 0 1 Plant cost 80500000 Assembly cost 2000000 Revenue 11000000 Cost 3500000 Property tax 250000 Before tax cash flow 7250000 Tax rate 39% After tax cash flow 4422500 2 Total initial cash outlay 8,25,00,000.00 Cash inflow each year 4422500 Recovery period 18.65 Years 3 ACTF 4422500 4 After tax MARR 13% PW of ACTF 3,40,19,230.77 Assuming ACTF will continue till perpetuity. So PW = ACTF/MARR 5 Equivalent Annual worth -4,84,80,769.23 6 Since the equivalent annual worth is negative we should not take this project

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