Question: A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS-GDS depreciation is used. If




A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS-GDS depreciation is used. If the desired after-tax return on investment is 10% per year, Design A: Capital investment: $1,540,000 MV at end of useful life: $807,500 Annual revenues less expenses: $400,000 MACRS property class (years): 5 - useful life (years): 7 Design B: Capital investment: $1,900,000 MV at end of useful life: $807,500 Annual revenues less expenses: $540,000 MACRS property class (years): 5 useful life (years): 6 . 1) What is the AW of the ATCF of Design A 2) What is the AW of the ATCF of Design B 3) For the design that should be chosen if repeatability assumption applies, please write the AW of the ATCF of the selected Design here. 4) What is the EVA of Design B in year 4
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