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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
7-35. The following information is for a proposed project that will provide the capability to produce a specialized product estimated to have a short market (sales) life:
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    Capital investment is $1,000,000. (This includes land and working capital.)
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    The cost of depreciable property, which is part of the $1,000,000 total estimated project cost, is $420,000.
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    Assume, for simplicity, that the depreciable property is in the MACRS (GDS) three-year property class.
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    The analysis period is three years.
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    Annual operating and maintenance expenses are $636,000 in the first year, and they increase at the rate of 6% per year (i.e., f¯ = 6%) thereafter. (See geometric gradient, Chapter 4.)
    Estimated MV of depreciable property from the project at the end of three years is $280,000.
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    Federal income tax rate = 34%; state income tax rate = 4%.
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    MARR (after taxes) is 10% per year.
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Based on an after-tax analysis using the PW method, what minimum amount of equivalent uniform annual revenue is required to justify the project economically? (7.9, 7.10)
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