Question: please use Excel to answer the question to help me understand A subsidiary of AEP places in service electric generating and transmission line equipment at
please use Excel to answer the question to help me understand
A subsidiary of AEP places in service electric generating and transmission line equipment at a cost of $3,000,000 with half of it borrowed at 11 percent over 8 years. It is expected to last 30 years with a salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4 percent each year thereafter. The subsidiary's tax rate is 40 percent, and after tax MARR is 9 percent. There is some concern that the need for this equipment will last only 10 years and need to be sold off for $550,000 at that time. Develop tables using a spreadsheet to determine the ATCF for each year and the after tax PW, AW, IRR and ERR after only 10 years to see if the venture would be worthwhile economically if 1. Straight line depreciation is used with no half year convention and the loan is paid back using interest only at the end of each year of the loan, plus principal at the end of the last year. 2. Straight line depreciation is used with no half year convention and the loan is paid back using equal annual principal payments plus interest on the unpaid loan balance. 3. Straight line depreciation is used with no half year convention and the loan is paid back using equal annual principal plus interest payments during each year of the loan. 4. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using interest only at the end of each year of the loan, plus principal at the end of the last year. 5. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using equal annual principal payments plus interest on the unpaid loan balance. 6. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using equal annual principal plus interest payments during each year of the loan. A subsidiary of AEP places in service electric generating and transmission line equipment at a cost of $3,000,000 with half of it borrowed at 11 percent over 8 years. It is expected to last 30 years with a salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4 percent each year thereafter. The subsidiary's tax rate is 40 percent, and after tax MARR is 9 percent. There is some concern that the need for this equipment will last only 10 years and need to be sold off for $550,000 at that time. Develop tables using a spreadsheet to determine the ATCF for each year and the after tax PW, AW, IRR and ERR after only 10 years to see if the venture would be worthwhile economically if 1. Straight line depreciation is used with no half year convention and the loan is paid back using interest only at the end of each year of the loan, plus principal at the end of the last year. 2. Straight line depreciation is used with no half year convention and the loan is paid back using equal annual principal payments plus interest on the unpaid loan balance. 3. Straight line depreciation is used with no half year convention and the loan is paid back using equal annual principal plus interest payments during each year of the loan. 4. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using interest only at the end of each year of the loan, plus principal at the end of the last year. 5. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using equal annual principal payments plus interest on the unpaid loan balance. 6. MACRS- GDS depreciation is used with the appropriate property class and the loan is paid back using equal annual principal plus interest payments during each year of the loan
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