Question

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 $201,000 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 $80,000. If the projected operating expense for the equipment is $63,000 per year, what is the after-tax equivalent uniform annual cost (EUAC) of owning and operating this equipment? The effective income tax rate is 26%, and the after-tax MARR is 15% per year. Click the icon to view the GDS Recovery Rates (r) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. The after-tax equivalent uniform annual cost is $ (Round to the nearest dollar.)

Answer 1

fix В2 year А В C D E Н К 1 annual net present present value of annual expense annual cash total annual tax benefit @ depreciation cash value annual net cash year outflow 26% (after tax) expense outflow factor outflow 2 0 $201,000.00 $63,000.00 $40,200.00 $63,000.00 $64,320.00 $63,000.00 $38,592.00 $201,000.00 $201,000.00 $31,451.69 3 1.0000 $103,200.00 -$26,832.00 $76,368.00 $36,168.00 4 1 0.8696 $127,320.00 -$ 33,103.20 -$26,413.92 $94,216.80 $29,896.80 $22,604.97 $24,055.35 $279,112.01 5 2 0.7561 $101,592.00 $75,178.08 $36,586.08 6 0.6575 $57,888.00 7 $22,112.00 $5,749.12 present value of salvage value salvage tax on present value salvage value (after tax) -$48,819.95 year salvage value value (after tax) factor 9 -$ 80,000.00 $5,749.12 -$74,250.88 10 3 0.6575 11 $230,292.06 present value of total net cash flows 12 table factor 13 2.2832 after-tax equivalent uniform annual cost $100,864 14 15 $100,864 after-tax equivalent uniform annual cost is 16 17 LO LON

for formulas and calculations, refer to the image below -

В2 year В А C D G Н I K 1 present value of present annual net total annual year annual cash outflow value depreciation tax benefit @ 26% annual expense (after tax) annual net cash cash outflow expense 2 factor outflow 0 |нз*13 |-СЗ G4-D4 201000 1 -E4*0.26 63000 -C4+D4 0.8696 -201000 20% -E4+F4 H4*14 4 - 201000*32% EC5+D5 -E5+F5 EG5-D5 - H5*15 63000 2 -E5*0.26 0.7561 5 - 201000 19.2% -C6+D6 -E6+F6 0.6575 63000 -E6*0.26 H6*16 6 G6-D6 -SUM(J3:J6) 7 C3-D4- D5- D6 D8*0.26 8 -80000-D7 tax on salvage salvage value present value of salvage salvage value present value factor year value (after tax) value (after tax) 9 =(80000-(C3-SUM(D4 C10+D10 0.6575 -80000 -E10 F10 10 11 present value of total net cash flows J7+G10 12 table factor 2.2832 13 =F12/F13 after-tax equivalent uniform annual cost 14 15 after-tax equivalent uniform annual cost is =F14 16 17 n

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