Your company has just signed a three-year nonrenewable contract with the city of New Orleans...
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Your company has just signed a three-year nonrenewable contract with the city of New Orleans for earthmoving work. You are investigating the purchase of heavy construction equipment for this job. The equipment costs $196,000 and qualifies for five-year MACRS depreciation. At the end of the three-year contract, you expect to be able to sell the equipment for $73,000. If the projected operating expense for the equipment is $69,000 per year, what is the after-tax equivalent uniform annual cost (EUAC) of owning and operating this equipment? The effective income tax rate is 42%, and the after-tax MARR is 11% per year.
What is the after-tax equivalent uniform annual cost?
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