Problem 4.6 (20 Points) Amazon is on a mission to be net zero carbon by 2040....

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Problem 4.6 (20 Points) Amazon is on a mission to be net zero carbon by 2040. As part of that endeavor they are considering using autonomous delivery vehicles which operate on alternative power sources (solar, battery, recycled oil, etc). The autonomous vehicles are expected to cost $100,000 each. Amazon wants to invest in 30 to start. Amazon will pay for 30% of the total cost of the autonomous vehicles outright and borrow the other 70 % . The loan is borrowed at 11% for 5 years. Each vehicle is estimated to have a salvage vale of $30,000 after 8 years. The autonomous delivery vehicles are expected to be able to deliver 24/7 and therefore are expected to increase revenue by $50,000 per unit per year and add operating expenses of $10,000 per unit per year. Federal corporate income taxes follow the table below. a) Develop tables using a spreadsheet to determine the ATCF (After Tax Cash Flow) for the 8 years of the AV's considering all 30 AVs. Negative taxable income is treated a $0 taxable income. a. Using straight line depreciation (8 points) b. Using MACRS depreciation with the appropriate property class (8 points) b) If they keep all 30 vehicles for 8 years calculate the Present Worth (PW) of the investment of all 30 vehicles for each method (SL and MACRS) using an after-tax MARR of 9%. (2 points) c) Calculate the IRR of the ATCF. Is this a good investment? (2 points) Tips: Every year's taxable income may not fall in the same tax bracket. If you have a loss in a year assume 0$ taxes paid. You cannot claim depreciation past the salvage value year. When solving for the PV of the after-tax cash flow DO NOT use the NPV formula. You need to make a new column and solve for the PV of each year and then sum them. o The NPV formula solves for net present value in year 0. This formula assumes the first value you select is one period from year 0 and that there is 0$ in year 0. If you really wanted to use it. You could use the NPV formula to solve for years 1-8 and add the year O amount to it. Corporate Income Taxes $ $ $ $ $ $ $ Reported Income $ 50,000.00 $ 75,000.00 $ 100,000.00 $ 335,000.00 $ 10,000,000.00 $ 15,000,000.00 $ $ 50,000.00 75,000.00 100,000.00 335,000.00 10,000,000.00 15,000,000.00 18,333,333.00 18,333,333.00 % Taxes Paid 15.0% 25.0% 34.0% 39.0% 34.0% 35.0% 38.0% 35.0% Problem 4.6 (20 Points) Amazon is on a mission to be net zero carbon by 2040. As part of that endeavor they are considering using autonomous delivery vehicles which operate on alternative power sources (solar, battery, recycled oil, etc). The autonomous vehicles are expected to cost $100,000 each. Amazon wants to invest in 30 to start. Amazon will pay for 30% of the total cost of the autonomous vehicles outright and borrow the other 70 % . The loan is borrowed at 11% for 5 years. Each vehicle is estimated to have a salvage vale of $30,000 after 8 years. The autonomous delivery vehicles are expected to be able to deliver 24/7 and therefore are expected to increase revenue by $50,000 per unit per year and add operating expenses of $10,000 per unit per year. Federal corporate income taxes follow the table below. a) Develop tables using a spreadsheet to determine the ATCF (After Tax Cash Flow) for the 8 years of the AV's considering all 30 AVs. Negative taxable income is treated a $0 taxable income. a. Using straight line depreciation (8 points) b. Using MACRS depreciation with the appropriate property class (8 points) b) If they keep all 30 vehicles for 8 years calculate the Present Worth (PW) of the investment of all 30 vehicles for each method (SL and MACRS) using an after-tax MARR of 9%. (2 points) c) Calculate the IRR of the ATCF. Is this a good investment? (2 points) Tips: Every year's taxable income may not fall in the same tax bracket. If you have a loss in a year assume 0$ taxes paid. You cannot claim depreciation past the salvage value year. When solving for the PV of the after-tax cash flow DO NOT use the NPV formula. You need to make a new column and solve for the PV of each year and then sum them. o The NPV formula solves for net present value in year 0. This formula assumes the first value you select is one period from year 0 and that there is 0$ in year 0. If you really wanted to use it. You could use the NPV formula to solve for years 1-8 and add the year O amount to it. Corporate Income Taxes $ $ $ $ $ $ $ Reported Income $ 50,000.00 $ 75,000.00 $ 100,000.00 $ 335,000.00 $ 10,000,000.00 $ 15,000,000.00 $ $ 50,000.00 75,000.00 100,000.00 335,000.00 10,000,000.00 15,000,000.00 18,333,333.00 18,333,333.00 % Taxes Paid 15.0% 25.0% 34.0% 39.0% 34.0% 35.0% 38.0% 35.0%