+1-415-670-9189
info@expertsmind.com
Compare macrs depreciation and straight-line depreciation
Course:- Chemical Engineering
Reference No.:- EM13883583




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Chemical Engineering

Task 1:

Total depreciable capital investment for a new project is $35.2 million. The pre-tax net annual income of this project is projected to start at $3,000,000 in year 1, and to increase by 3% annually through the 20 year life of this project.Thirty-five percent of the depreciable capital falls under a 7-year depreciation schedule and the remainder falls under a 15year depreciation schedule.

i. Compare MACRS depreciation and straight-line depreciation: based solely on the tax effects, which depreciation method (SL or MACRS) would yield a higher net present value for the project? (assume annual interest rate of 12%, compounded annually, tax rate of 35%).

ii. How sensitive is your answer to the interest rate (e.g., if the interest rate varies between, say 8% and 15%?)

iii. How sensitive is your answer to the tax rate (e.g., if the tax rate varies between 35% and 28%)

Task 2: In this part use 12 MM as the initial capital investment

Given the following economic information for a new specialty chemical plant:

i. Initial (depreciable) capital investment: YOUR ASURITE ID, DIVIDED BY 100, rounded to 3 sig figs. E.g., if your ID were 1234567890, the initial capital investment would be $12.3 MM.)

ii. Additional depreciable capital investment at the end of year 8: $ 1.3 MM

iii. All equipment depreciated using 10 years MACRS rates.

iv. Required initial working capital: 12% of depreciable capital for the project

v. Assume annual production hours for this project falls in line with typical chemical processes. Production rate is 220 kg/day. The product can currently be sold for $18.4/kg and the price has been increasing by an average of 2.8% annually for the past 10 years.

vi. The raw materials for the process cost $1.95/kg with a steady increase of 2.5 % in value over the past 10 years and 95 wt% of the raw material is converted to product.

vii. The utilities cost $220K annually, not expected to increase or decrease

viii. The labor cost for the process is $200K annually, not expected to increase or decrease

ix. Taxes are 35% of annual profit.

a. If a MAR of 15% is required calculate the NPV for this project.

b. What is the DCFRoR for this project.

c. If you could decrease ONE of the following by 10%, which would be most economically advantageous, and why - justify your answer quantitatively, and discuss.

Tax rate

Raw Material cost

Utility cost

Answered:-

Verified Expert


Preview Container content

Reflections are the thoughts or processes that we think about or what we acquire from the readings and studies. It basically revolves around our perceptions and analysis of things as we go through them or experience them. There are two factors involves under reflection and they include pre-reflection and post-reflection. It is about developing a serious thought or consideration about something (Croft, 2012). Talking about pre-reflection, it refers to our understanding and expectations in terms of a concept that we are about to go through and study. Post-reflections are the critical analysis that we adhere to once we have understood the terms and gone through the work.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Chemical Engineering) Materials
The product may bemobile or immobile; since the reaction is irreversible, it does not matter. Thisreaction shows the solute's penetration across the film. Write mass balance
If the excitation is adjusted such that the magnitudes of the excitation voltage and the terminal voltage are equal, and if the motor is taking 20 A, find the torque develop
Momentum fluxes for creeping flow into a slot (Fig. 3.B-7). An incompressible Newtonian liquid is flowing very slowly into a thin slot of thickness 2B (in the y direction) a
5. A patient is placed on a kidney dialysis unit three times a week. The dialyzer has a membrane area of 1 m2 and is operated in a countercurrent mode. The blood flow rate is
Compound Y has a solubility of 20.0g/100mL in ether.What mass of compound of Y would be removed from a solution of 1.8g of Y in 100mL of water by a single extraction with 100m
CHEN 623 - Applications of Thermodynamics to Chemical Engineering Exam. A continuous ideal gas stream with flow rate equal to 20 moles/s at 900 K and 10 bar enters an adiabat
Waste Wood Biomass and Energy Issues and develop a techno-economic analysis of Thermo chemical processing route for the conversion of wood waste biomass in Nigeria to energy.
Determine the temperature and pressure of the steam in its intermediate state between the two turbines. What is the overall efficiency of the two turbines together with resp