A Proposed chemical plant will cost $100,000,000, which will be depreciated by MACRS rules over 5- years.
Question:
A Proposed chemical plant will cost $100,000,000, which will be depreciated by MACRS rules over 5- years. Each year the plant will produce 100,000,000 lbs of product. The fixed costs of running the plant are $20,000,000/year. The variable cost for the product (Raw material + energy) is $0.50c/lb. The product sells $ 1.10 lb.
The combined incremental tax rate for the corporation is 45% consider the plant to be a 6-year project.
a. Make a table showing gross income, depreciation, taxable income, taxes paid, BT Cash flow and AT Cash flow)
b. What is the Before Tax Rate of Return (BTROR) and the after tax rate of return (ATROR)
c. If the After Tax Minimum Acceptable Rate of Return (AT MARR) is 15% should the project proceed?
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle