The following information is for a proposed project that will provide the capability to produce a specialized
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• Capital investment is $1,000,000. (This includes land and working capital.)
• The cost of depreciable property, which is part of the $1,000,000 total estimated project cost, is $420,000.
• Assume, for simplicity, that the depreciable property is in the MACRS (GDS) three-year property class.
• The analysis period is three years.
• Annual operating and maintenance expenses are $636,000 in the first year, and they increase at the rate of 6% per year (i.e., / = 6%) thereafter. (See geometric gradient, Chapter 4.)
• Estimated MV of depreciable property from the project at the end of three years is $280,000.
• Federal income tax rate = 34%; state income tax rate = 4%.
• MARR (after taxes) is 10% per year.
Based on an after-tax analysis using the PW method, what minimum amount of equivalent uniform annual revenue is required to justify the project economically?
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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