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Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost $13.2 million and is expected to generate an income of $7.5 million the first year (growing $1 M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or...years?

Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost $13.2 million and is expected to generate an income of $7.5 million the first year (growing $1 M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or... years? Contributed by Paul R. McCright, University of South Florida Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost $13.2 million and is expected to generate an income of $7.5 million the first year (growing $1 M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or... years? Contributed by Paul R. McCright, University of South Florida

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