Milliken uses a digitally controlled dyer for placing intricate and integrated patterns on manufactured carpet squares for
Question:
Milliken uses a digitally controlled dyer for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. The dyer is classified as MACRS-GDS 5-year property (remember the half-year convention). It is purchased for \($400,000.\) Its market value will be \($310,000\) at the end of the first year and will drop by \($40,000\) per year thereafter to a minimum of \($30,000.\) Operating costs are \($20,000\) the first year, increasing by 8 percent per year. Maintenance costs are only \($8,000\) the first year but will increase by 35 percent each year thereafter. Milliken is in the 40 percent tax bracket, and their after-tax MARR is 12 percent. Determine the after-tax optimum replacement interval. Do not consider a Section 1031 exchange. If the salvage value differs from the book value when replacement occurs, the difference is taxed at the normal income tax rate.
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt