preferably show excel steps, such as the equations used in each cell in excel. 3

Question

preferably show excel steps, such as the equations used in each cell in excel.

3. A tele phone company is considering building a new automated switching distribution substation with a useful lfe of 20 years to support new suburban developments. The substation is located in a state in which the combined tax rate is 40%, and the telephone company uses a l 5% real interest MARR to assess capital investment projects. Estimated real dollar revenues and costs are as follows: Amount $1,157,000 S 250,000 S 575,000 S 150,000 S36,500 s 650,000 year I S Building initial cost Equipment salvage value Revenue arithmetic gradient Annual operating expenses 20,000 years 2 to 5 750,000 years 6 to 20 185,000 first 10 years S 230,000, years to 15 S 275,000, years 16 to 20 S S The substation will be put into service on the first day of the telephone company's fiscal year. Using MACRS depreciation, what will be the telephone company's after tax equiv alent uniform annual worth for the substation?

Explanation / Answer

Ans: Calculations of Net Depreciations, cost of the assets, NET WDV & Net salvage values

Calculation of Net Revenues, Expenses & After tax Operating incomes and Use of Prsent Value Factor

Thus based on the above the net evaluation of the project's worth is as under:

Hence, since the net present value of the project is negative so project should not be undertaken.

0 MACRS Rates Cost-BLDG Depreciation-BLDG WDV Cost-EQPT Depreciation-EQPT WDV Total Depreciation 1 3.75        11,57,000                           43,388        11,13,613        5,75,000                           21,563        5,53,438                          64,950 2 7.219        11,57,000                           83,524        10,73,476        7,25,000                           52,338        6,72,662                      1,35,862 3 6.677        11,57,000                           77,253        10,79,747        7,25,000                           48,408        6,76,592                      1,25,661 4 6.177        11,57,000                           71,468        10,85,532        7,25,000                           44,783        6,80,217                      1,16,251 5 5.713        11,57,000                           66,099        10,90,901        7,25,000                           41,419        6,83,581                      1,07,519 6 5.285        11,57,000                           61,147        10,95,853        7,25,000                           38,316        6,86,684                          99,464 7 4.888        11,57,000                           56,554        11,00,446        7,25,000                           35,438        6,89,562                          91,992 8 4.522        11,57,000                           52,320        11,04,680        7,25,000                           32,785        6,92,216                          85,104 9 4.462        11,57,000                           51,625        11,05,375        7,25,000                           32,350        6,92,651                          83,975 10 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 11 4.452        11,57,000                           51,510        11,05,490        7,25,000                           32,277        6,92,723                          83,787 12 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 13 4.462        11,57,000                           51,625        11,05,375        7,25,000                           32,350        6,92,651                          83,975 14 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 15 4.462        11,57,000                           51,625        11,05,375        7,25,000                           32,350        6,92,651                          83,975 16 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 17 4.462        11,57,000                           51,625        11,05,375        7,25,000                           32,350        6,92,651                          83,975 18 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 19 4.462        11,57,000                           51,625        11,05,375        7,25,000                           32,350        6,92,651                          83,975 20 4.461        11,57,000                           51,614        11,05,386        7,25,000                           32,342        6,92,658                          83,956 Total                     11,31,072 Total                       7,03,128 Net WDV                           25,928 Net WDV                           21,872 Salvage                       2,50,000 Salvage 36500 Net Salvage                       2,24,072 Net Salvage                           14,628

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