A semiconductor manufacturer is considering the installation of an automatic control system. This is estimated to produce

Question:

A semiconductor manufacturer is considering the installation of an automatic control system. This is estimated to produce savings in the production process equivalent to $40,000 per year. The equipment has an initial cost of $50,000 and an estimated operating cost of $20,000. at the end of its economic life of 7 years will be $5,000. Assume that this control system is depreciated as MACRS (GDS) five-year property class life, that the effective income tax is 40% and that capital gains are to be considered (fixed at 35%). Find the PW of ATCFs if is 15%.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... 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...