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Rework Example 7-21 using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method 7-21. A new municipal refuse collection vehicle can be purchased for $84,000. Its expected useful life is 6 years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF) will be +$18,000 per year over the 6-year life of the vehicle. (7.9) a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment. b. What is the after-tax internal rate of return? c. Is this vehicle a sound investment? Explain your answer.

Rework Example 7-21 using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method 7-21. A new municipal refuse collection vehicle can be purchased for $84,000. Its expected useful life is 6 years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF) will be +$18,000 per year over the 6-year life of the vehicle. (7.9) a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment. b. What is the after-tax internal rate of return? c. Is this vehicle a sound investment? Explain your answer.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 18E
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Rework Example 7-21 using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method

7-21. A new municipal refuse collection vehicle can be purchased for $84,000. Its expected useful life is 6 years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF) will be +$18,000 per year over the 6-year life of the vehicle. (7.9) a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment. b. What is the after-tax internal rate of return? c. Is this vehicle a sound investment? Explain your answer.

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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