.Select the preferred alternative using ATCF-Present-Worth(PW) and using Incremental Analysis Method. After recognition of Inflation .(f=3%).Taxrate 40% MARR=10%

Assume actual cash flows are in real dollars (R$) )(base=0) A$ R$ (F / P, f ,k b) R$ (1 f )(kb) kkk

Depreciation method

a.

b.

For Alt-A Straight-Line (SL) Method (Classical Method) SL=(Investment-SV) / N For Alt-B MACRS GDS 5 years recovery period.

For Alt-C MACRS-ADS 5 years recovery period.

c.

Find the ATCF for the alternatives using A$ cash flows, them evaluate all alternatives on ATCF using incremental analysis PW.

($000) R$

Capital Investment

Annual Expenses

Annual Revenues

Market Value (MV or SV)) Useful life

EOY[k]

0 1-8 8

B $15,000

C $20,000

3,000 4,000 2,000

8

A $10,000

9,000 10,000 1,000

8 A$-BTCF

5,000 6,000 1,000 8

R$ BTCF

(1+f)^k Inflation

Depreciation Macrs-GDS --------

Taxable Income --------

TAX= A$ -.40*TI ATCF -------- -------

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REMOVER INFLACION (A$ a R$) ATCF in R$