A proposed project will provide the capability to produce a specialized product estimated to have a short market  (sales) life. Based on an after-tax analysis using the PW  method, what minimum amount of equivalent uniform annual revenue is required to justify the project economically?

   

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Capital investment is $1,070,000. (This includes land and working capital.) • The cost of depreciable property, which is part of the $1,070,000 total estimated project cost, is $430,000. Assume, for simplicity, that the depreciable property is in the MACRS (GDS) three-year property class. • The analysis period is three years. • Annual operating and maintenance expenses are $679,000 in the first year, and they increase at the rate of 8% per year (i.e., F = 8%) thereafter. • Estimated MV of depreciable property from the project at the end of three years is $330,000. ● • Federal income tax rate = 38%; state income tax rate= 5%. • MARR (after taxes) is 15% per year. Use the half-year time convention for depreciation in the last year. Capital investment is $1,070,000. (This includes land and working capital.) • The cost of depreciable property, which is part of the $1,070,000 total estimated project cost, is $430,000. Assume, for simplicity, that the depreciable property is in the MACRS (GDS) three-year property class. • The analysis period is three years. • Annual operating and maintenance expenses are $679,000 in the first year, and they increase at the rate of 8% per year (i.e., F = 8%) thereafter. • Estimated MV of depreciable property from the project at the end of three years is $330,000. ● • Federal income tax rate = 38%; state income tax rate= 5%. • MARR (after taxes) is 15% per year. Use the half-year time convention for depreciation in the last year.

Answer rating: 100% (QA)

Assuming a MARR of 15 per year and a 3year analysis period the minimum amount of equivalent uniform ... View the full answer