What will be the telephone companys after tax equivalent

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Reference no: EM132025313

A telephone company is considering building a new automated switching distribution substation with a useful life 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 15% real interest MARR to assess capital investment projects.

Estimated real dollar revenues and costs are as follows:

Category Amount Building initial cost $1,757,000 Building salvage cost $ 200,000 Equipment initial cost $ 775,000 Equipment cost year 2 $ 150,000 Equipment salvage value $ 36,500 Annual revenues $ 740,000 year 1 Revenue arithmetic gradient $ 30,000 years 2 to 5 Annual revenues $ 890,000 years 6 to 10 $ 925,000 years 11 to 15 $ 960,000 years 16 to 20 Annual operating expenses $ 185,000 first 10 years $ 240,000, years 11 to 15 $ 290,000, years 16 to 20 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 equivalent uniform annual worth for the substation?

Reference no: EM132025313

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