The defender in a catalytic oxidizer manufacturing plant has a market value of $130,000 and expected annual operating costs of $70,000 with no salvage value after its remaining life of 3 years. The depreciation charges for the next 3 years will be $69,960, $49,960, and $35,720. Using an effective tax rate of 35%, determine the CFAT for next year only

The defender in a catalytic oxidizer manufacturing plant has a market value of $130,000 and expected annual operating costs of $70,000 with no salvage value after its remaining life of 3 years. The depreciation charges for the next 3 years will be $69,960, $49,960, and $35,720. Using an effective tax rate of 35%, determine the CFAT for next year only that should be used in a present worth equation to compare this defender against a challenger that also has a 3-year life. Assume the company's after-tax MARR is 12%.


Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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Related Book For answer-question

Engineering economy

7th Edition

Authors: Leland Blank, Anthony Tarquin

ISBN: 978-0073376301