Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 84

Offshore platform safety equipment, designed for special jobs, will cost $2,500,000, will have no salvage value, and will be kept in service for exactly 5 years, according to company policy. Operating revenue minus expenses is estimated to be $1,500,000 in year 1 and only $300,000 each additional year. The effective tax rate for the multinational oil company is 30%. Show hand and spreadsheet solutions, as instructed, to find the after-tax ROR using
a) classical SL depreciation and b) MACRS 5-year depreciation, neglecting any tax effects at the end of 5 years of service.