Accurate Industries purchased a new machine has an initial cost of $54,000 and p
ID: 2626889 • Letter: A
Question
Accurate Industries purchased a new machine has an initial cost of $54,000 and produces savings of $19,000/year.
a)The depreciation is based on a 5 year MACRS property (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%). What is the Book Value when the equipment is sold in year 5*? _____________(ans. $x,xxx)
b) Calculate the ATCF if the operation is discontinued after 5 years and the equipment is sold for $11,100. Assume a tax rate of 34%.
What is the after tax IRR? ___________ (ans. xx.x%)
If the after tax MARR is 15%, is this a good investment? ________ (ans. Yes or No)
Explanation / Answer
Solution a)
Book value of equipment at the end of 5 years = Initial Cost