Problem 1 (25 points) A manufacturing firm must choose between two mutually exclusive pieces of equipment...

 

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Problem 1 (25 points) A manufacturing firm must choose between two mutually exclusive pieces of equipment for one of its production lines. The company uses an effective tax rate of 34% and an after-tax MARR of 10%. Which option should they select on an after-tax basis? EOY 0 1 2 3 4 EOY 0 2 3 4 Initial Cost Annual Net Revenues Salvage Value Depreciation Method Depreciable life Useful life CFBT CFBT d d Option 1 $100,000 $40,000 $25,000 TI TI Option 2 $300,000 $100,000 $75,000 MACRS 3-year GDS 4 years Tax Tax CFAT CFAT Problem 1 (25 points) A manufacturing firm must choose between two mutually exclusive pieces of equipment for one of its production lines. The company uses an effective tax rate of 34% and an after-tax MARR of 10%. Which option should they select on an after-tax basis? EOY 0 1 2 3 4 EOY 0 2 3 4 Initial Cost Annual Net Revenues Salvage Value Depreciation Method Depreciable life Useful life CFBT CFBT d d Option 1 $100,000 $40,000 $25,000 TI TI Option 2 $300,000 $100,000 $75,000 MACRS 3-year GDS 4 years Tax Tax CFAT CFAT