Will give full stars to the correct answer with breakdown of equations used. Tha

Question

Will give full stars to the correct answer with breakdown of equations used. Thank you

AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment = $358,000; market value at end of year six = $126,000; annual revenues = $124,000; annual expenses = $8,000; equipment life = 6 years; effective income tax rate = 50%; and after-tax MARR = 8% per year. MACRS depreciation will be used with a five-year recovery period. Compute the PW of the equipment's ATCFs. Calculate the PW of the EVA of this equipment. Calculate the PW of the equipment's ATCFs.

Explanation / Answer

Year Revenues Expenses MACRS Depn. Taxable income Tax Amt. @ 50% Net amt. Add back: Reduced C/F due to tax on depn. Net Annual Cash flow PV F @ 8% PV @ 8% 0 -358000 -358000 1 -358000 1 124000 -8000 -71600 44400 22200 22200.00 35800 58000.00 0.92593 53703.94 2 124000 -8000 -114560 1440 720 720.00 57280 58000.00 0.85734 49725.72 3 124000 -8000 -68736 47264 23632 23632.00 34368 58000.00 0.79383 46042.14 4 124000 -8000 -41241.6 74758.4 37379.2 37379.20 20620.8 58000.00 0.73503 42631.74 5 124000 -8000 -41241.6 74758.4 37379.2 37379.20 20620.8 58000.00 0.68058 39473.64 6 124000 -8000 -20620.8 95379.2 47689.6 47689.60 10310.4 58000.00 0.63017 36549.86 6 Market value 126000 0.63017 79401.42 Net Present value -10471.54

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