A special-purpose machine tool set would cost $20,000. The tool set will be financed by a $10,000 bank loan repayable in two equal annual installments at 10% compounded annually. The tool is expected to provide annual (material) savings of $30,000 for two years and is to be depreciated by the MACRS three-year recovery period. The tool will require annual O&M costs in the amount of $5,000. The salvage value at the end of the two years is expected to be $8,000. Assuming a marginal tax rate of 25% and MARR of 15%, what is the net present worth of this project?

MACRS Depreciation Schedules

Class 5 7 10 15 _ 20 Year n Depreciation rate 200% 200% 200% 200% 150% 150% 33.33 44.45 14.81 7.41 20.00 32.00 19.20 11.52 11.52 5.76 10.00 18.00 14.40 11.52 14.29 24.49 17.49 12.49 8.93* 8.92 8.93 4.46 9.22 7.37 6.55* 6.55 6.56 6.55 3.28 5.00 9.50 8.55 7.70 6.93 6.23 5.90* 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 21 Year to switch from declining balance to straight line More Info Single Payment Compound Present Amount Worth Factor Factor (F/P, I, N) (P/F, i, N) 1.1400 0.8772 1.2996 0.7695 1.4815 0.6750 1.6890 0.5921 1.9254 0.5194 Compound Amount Factor (F/A, i, N) 1.0000 2.1400 3.4396 4.9211 6.6101 Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, i, N) (P/A, I, N) 1.0000 0.8772 0.4673 1.6467 0.2907 2.3216 0.2032 2.9137 0.1513 3.4331 Capital Recovery Factor (A/P, i, N) 1.1400 0.6073 0.4307 0.3432 0.2913 2.1950 2.5023 2.8526 3.2519 3.7072 0.4556 0.3996 0.3506 0.3075 0.2697 8.5355 10.7305 13.2328 16.0853 19.3373 0.1172 0.0932 0.0756 0.0622 0.0517 3.8887 4.2883 4.6389 4.9464 5.2161 0.2572 0.2332 0.2156 0.2022 0.1917 Print Done Class 5 7 10 15 _ 20 Year n Depreciation rate 200% 200% 200% 200% 150% 150% 33.33 44.45 14.81 7.41 20.00 32.00 19.20 11.52 11.52 5.76 10.00 18.00 14.40 11.52 14.29 24.49 17.49 12.49 8.93* 8.92 8.93 4.46 9.22 7.37 6.55* 6.55 6.56 6.55 3.28 5.00 9.50 8.55 7.70 6.93 6.23 5.90* 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 21 Year to switch from declining balance to straight line More Info Single Payment Compound Present Amount Worth Factor Factor (F/P, I, N) (P/F, i, N) 1.1400 0.8772 1.2996 0.7695 1.4815 0.6750 1.6890 0.5921 1.9254 0.5194 Compound Amount Factor (F/A, i, N) 1.0000 2.1400 3.4396 4.9211 6.6101 Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, i, N) (P/A, I, N) 1.0000 0.8772 0.4673 1.6467 0.2907 2.3216 0.2032 2.9137 0.1513 3.4331 Capital Recovery Factor (A/P, i, N) 1.1400 0.6073 0.4307 0.3432 0.2913 2.1950 2.5023 2.8526 3.2519 3.7072 0.4556 0.3996 0.3506 0.3075 0.2697 8.5355 10.7305 13.2328 16.0853 19.3373 0.1172 0.0932 0.0756 0.0622 0.0517 3.8887 4.2883 4.6389 4.9464 5.2161 0.2572 0.2332 0.2156 0.2022 0.1917 Print Done