$7-22.$ A company is considering the purchase of a capital

asset for $$100,000.$ Installation charges needed to make

the asset serviceable will total $$30,000.$ The asset will be

depreciated over six years using the straight$-$line method

and an estimated salvage value $(S{V}_6)$ of $$10,000.$ The

asset will be kept in service for six years, after which it will

be sold for $$20,000.$ During its useful life, it is estimated

that the asset will produce annual revenues of $$30,000.$

Operating and maintenance $(O$&$M$ costs are estimated to

be $$6,000$ in the first year. These $O$&$M$ costs are projected

to increase by $$1,000$ per year each year thereafter. The

after tax MARR is $12\%$ and the effective tax rate is $40\%.$

$(7\mathrm{.}9)$

a$.$ Use the tabular format given in Figure $7-5$ to compute

the after$-$tax cash flows.

b$.$ Compute the after$-$tax present worth of the project,

and use a uniform gradient in your formulation.

c$.$ The before$-$tax present worth of this asset is $-$$$50,070.$

By how much would the annual revenues have to

increase to make the purchase of this asset justifiableFigure $7\mathrm{.}5$ General Format $($Worksheet$)$ for After$-$Tax Analysis; Determining the ATCF

on a before$-$tax basis?