Question

Assume that you will buy and operate a piece of equipment. The machine costs $25,000. You estimate that the equipment will generate $10,000 revenue, each year for six years. You also estimate that operating costs for the machine will be $4,500 each year for six years. These estimates are in constant 2019 dollars. The inflation rate for revenues is estimated to be 3.5%. The inflation rate for operating costs is estimated to be 5.0%.   You will depreciate the machine using the MACRS method, and the 5-year category. The marginal tax rate = 34%. The salvage value = 0.

1. Determine the after-tax cash flow, in actual $.
2. Determine the book value of the machine for each year
3. Determine the NPW of the actual-dollar, after-tax cash flow, if the MARR = 6%.

Year	Revenues Actual $	Operating Costs           Actual $	Before Tax Cash Flow Actual $	MACRS %	Depreciation Amount (dt)	Book Value	Taxable Cash Flow	Tax	After Tax Cash Flow Actual $
0	NA	NA		NA	NA		NA	NA
1
2
3
4
5
6

MACRS Table

Year	3-Year	5-Year	7-Year
1	33.33	20	14.29
2	44.45	32	24.49
3	14.81	19.2	17.49
4	7.41	11.52	12.49
5		11.52	8.93
6		5.76	8.92
7			8.93
8			4.46

Answer 1

Based on the given data, pls find below the workings and answers highlighted in yellow: