Andes Inc. is considering the purchase of a new automated pallet stacking device to decrease labor costs in its distribution center. For this device, the following data apply: Purchase price = $648,000 $360,000 from own funds (equity) and $288,000 from a loan} Equipment Life: 4 years Estimated salvage: $129,600 EOY 1 2 Expected O&M Costs $43,200 $57,600 $72,000 $86,400 3 4 Depreciation: MACRS-GDS 3-year property Effective tax rate: 35% $259,200 $288,000 $316,800 $345,600 Conditions on loan: $288,000 borrowed at a nominal rate of 6% per year compounded annually. The loan is to be renaid over 3 years with equal annual payments. Loan calculations - principal and interest payments. (Round off values to the nearest dollar) b) Find the ATCF for each year of this investment (Round off values to the nearest dollar). Estimated Labor Savings

Andes Inc. is considering the purchase of a new automated pallet stacking device to decrease labor costs in its distribution center. For this device, the following data apply: Purchase price = $648,000 $360,000 from own funds (equity) and $288,000 from a loan} Equipment Life: 4 years Estimated salvage: $129,600 EOY 1 2 Expected O&M Costs $43,200 $57,600 $72,000 $86,400 3 4 Depreciation: MACRS-GDS 3-year property Effective tax rate: 35% $259,200 $288,000 $316,800 $345,600 Conditions on loan: $288,000 borrowed at a nominal rate of 6% per year compounded annually. The loan is to be renaid over 3 years with equal annual payments. Loan calculations - principal and interest payments. (Round off values to the nearest dollar) b) Find the ATCF for each year of this investment (Round off values to the nearest dollar). Estimated Labor Savings

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 17P

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