Design A Design B $1,000,000 $2,000,000 MV at end of useful life $1,000,000 $1,100,000 $400,000 Capital investment Annual revenues less $200,000 expenses MACRS property class Useful life Б уears 7 years 5 years 6 уears

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 20%, and MACRS depreciation is used. If the desired after-tax return on investment is 10% per year, which design should be chosen? State your assumptions.

Design A
Design B
$1,000,000 $2,000,000
MV at end of useful life $1,000,000 $1,100,000
$400,000
Capital investment
Annual revenues less
$200,000
expenses
MACRS property class
Useful life
Б уears
7 years
5 years
6 уears
Transcribed Image Text:Design A Design B $1,000,000 $2,000,000 MV at end of useful life $1,000,000 $1,100,000 $400,000 Capital investment Annual revenues less $200,000 expenses MACRS property class Useful life Б уears 7 years 5 years 6 уears
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