Suppose that Darth Maul is considering a cybernetics project. The cybernetics pr

Question

Suppose that Darth Maul is considering a cybernetics project. The cybernetics project will cost $100, 000 as a first cost. It will provide net annual benefits of $15,000 for 9 years, and then will yield a salvage value of $10, 000 after the 9th year. If the MARR is 5%, we use straight-line depreciation, and the federal tax bracket is 20%, answer the following questions using AFTER-TAX ANALYSIS. a. Will this project be undertaken using present worth analysis? b. Will this project be undertaken using annual worth analysis? c. Will this project be undertaken after calculating the firm's IRR? d. Will this project be undertaken using a cost-benefit ratio? c. Are there qualitative differences from your answers in (a), (b), (c), and (d)? f. Why are there QUANTITATIVE differences from your answers in (a), (b), (c), and (d)?

Explanation / Answer

cash flow cost -100000 -100000 year -100000 dep after dep cash flow tax after tax after tax cash flow after tax before dep present value@5% 1 15000 10000 5000 1000 4000 10000 14000 0.952381 13333.33 2 15000 10000 5000 1000 4000 10000 14000 0.907029 12698.41 3 15000 10000 5000 1000 4000 10000 14000 0.863838 12093.73 4 15000 10000 5000 1000 4000 10000 14000 0.822702 11517.83 5 15000 10000 5000 1000 4000 10000 14000 0.783526 10969.37 6 15000 10000 5000 1000 4000 10000 14000 0.746215 10447.02 7 15000 10000 5000 1000 4000 10000 14000 0.710681 9949.539 8 15000 10000 5000 1000 4000 10000 14000 0.676839 9475.751 9 15000 10000 5000 1000 4000 10000 14000 0.644609 9024.525 10 10000 10000 0 0 0 10000 10000 0.613913 6139.133 present valuee of cash inflow 105648.6 cash outflow -100000 answer to a NPV 5648.636 yes project should be undertaken as NPV Is positive answer to c IRR 7.62% yes project should be undertaken as IRR Is greater than MARR annual worth analysis after tax cash inflow 14000 investment 100000 answer to b averahe annual return 0.14 14% yes this project should be undertaken aon the basis of annual worth answer to d cost associated with project 100000 benefits earned 145000 total benefits 45000 yes project should be undertaken answer to e yes there is difference between in asnwer in 1&3 and 2&4 1&3 uses concept value of money concept while 2&4 both are accounting concept. answer to f the difference in quantative difference because of the techniques applies as NPV denotes the additions in investment in form of value while IRR denotes this in the form of percentage. While annual return denotes the accounting returns in the form of percentage while cost benefits analysis is in the form of value

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