## Related questions with answers

AgriGrow can invest in a 100-day short-term project with similar cash flows to those in problem 23 costing $90,000 to improve customer service. They believe the return on the project will be a net increase in sales of$37,000 per year over 3 years and of $43,000 in the fourth year. AgriGrow’s marginal tax rate is 40 percent, and MARR is 10 percent on the after-tax cash flows.

a. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after 4 years.

b. Compare the results of Part a with those of Problem 23b, where MACRS-GDS is used. Explain the differences.

Solution

Verified## We have the following data:

AgriGro can invest in a 100-day-term project with similar cash flows to those problem 23 with the following given: First cost $P$ = -$90,000 Annual profit $\text{CF}_{1~\text{to}~3}$ = $37,000 Profit at the end of 4th year $\text{CF}_{8}$ = $43,000 Tax rate = 40 percent $MARR$ = 10 percent

Required:
**a. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW IRR, and ERR.**
**b. Compare the results with the results from Prob.21 where MACRS-GDS depreciation is used.**

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