7 FreeBird Software has developed partnershipswith several
Chapter 17, Problem 17.67(choose chapter or problem)
7 FreeBird Software has developed partnershipswith several large manufacturing corporations touse a Java-derivative software in their consumerand industrial products. A new corporation will beformed to manage these applications. One majorproject involves using Java in commercial andindustrial appliances that store and cook food. Thegross income and expenses are expected to followthe relations below for the estimated life of 6 years.For t = 1 to 6 years: Annual GI = 2,800,000 100,000tAnnual OE = 950,000 + 50,000t For the new company, Te = 35%, after-tax MARR =12% per year, and the depreciation method chosenfor the $3,000,000 in capital investment is the5-year MACRS alternative that allows straight linewrite-off with the half-year convention in years 1and 6. Using a spreadsheet, estimate (a) the annualeconomic contribution of the project to the newcorporation, and (b) the equivalent annual worth ofthese contributions. (c) At what after-tax MARRwill the AW of contributions exceed $400,000per year?
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