AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by...

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AMT, Inc., is considering the purchase of a digital camera formaintenance of design specifications by feeding digital picturesdirectly into an engineering workstation where computer-aideddesign files can be superimposed over the digital pictures.Differences between the two images can be noted, and corrections,as appropriate, can then be made by design engineers. (7.12)
a. You have been asked by management to determine the PW of theEVA of this equipment, assuming the following estimates: capitalinvestment = $345,000; market value at end of year six = $120,000;annual revenues = $120,000; annual expenses = $8,000; equipmentlife = 6 years; effective income tax rate = 50%; and after-tax MARR= 10% per year. MACRS depreciation will be used with a five-yearrecovery
period.
b. Compute the PW of the equipmentâ€™s ATCFs. Is your answer inPart (a) the same as your answer
in Part (b)

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3.7 Ratings (494 Votes)

5MACRS depreciation schedule Year n Cost C Depreciation rate r Depreciation Cr Book value BV 0 345000 1 20 69000 276000 2 32 110400 165600 3 1920 66240 99360 4 1152 39744 59616 5 1152 39744 19872 6 576 19872 0 a EVA NOPAT in Year n aftertax MARR Book value at the beginning of Year n NOPAT Taxable income Income tax Formula Year end n 0 1 2 3 4 5 6 6 Capital outflow See Answer

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