Mid-America Shipping is considering purchasing anew barge
Chapter , Problem 12-56(choose chapter or problem)
Mid-America Shipping is considering purchasing anew barge for use on its Ohio River routes. Thenew barge will cost $13.2 million and is expectedto generate an income of $7.5 million the first year(growing $1M each year), with additional expensesof $2.6 million the first year (growing$400,000 peryear). If Mid-America uses MACRS, is in the 38%tax bracket, and has a MARR of 12%, what is thepresent worth of the first 4 years of after-tax cashflows from this barge? Would you recommend thatMid-America purchase this barge? (Hints: Remem-berthat all expensesare deductedfrom income priorto determining the taxes. Round to the nearest tenthof a million dollars.)Contributed by Paul R. McCright, University ofSouth Florida
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