BlastCo Analytics needs to purchase a new metal shaper. BlastCos after-tax MARR is 12% and the corporate
Fantastic news! We've Found the answer you've been seeking!
Question:
BlastCo Analytics needs to purchase a new metal shaper. BlastCo’s after-tax MARR is 12% and the corporate tax rate is 54%. A metal shaper is a CCA Class 8 asset. The remaining data are contained in the table below.
| Model | First Cost | Economic Life (Years) | Annual Net Savings | Salvage Value |
| Flex | $100,000 | 5 | $50,000 | $20,000 |
| Blender | $120,000 | 5 | $55,000 | $25,000 |
| Flextastic | $200,000 | 5 | $75,000 | $100,000 |
(a) Using the annual worth method, which model should BlastCo buy?
(b) What is the approximate after tax IRR of each model?
(c) What is the exact after tax IRR of each model?
Expert Answer:
a The annual worth of each model can be calculated using the following formula Ann ual Worth Ann ual ... View the full answer
Related Book For 
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
