Assume the same facts as in Problem 11 22 except
Assume the same facts as in Problem 11- 22, except that the plant is located in Austin, Texas. A- 1 Chips has no special waiver on income taxes. It pays a 25% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the same 25% rate.

1. Sketch the after- tax cash inflows and outflows of the modernize and replace alternatives over the 2014– 2020 period.
2. Calculate the net present value of the modernize and replace alternatives.
3. Suppose A-1 Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. A- 1 Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Use the data in Problem 11- 22 and this problem to briefly describe in qualitative terms the income tax features that would be advantageous to A- 1 Chips.

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help