Question: Staffing Virginia Tech football games (ticket & ba.
Staffing Virginia Tech football games (ticket & bag checkers, security, concessions, etc.) costs approximately S99, 000 each year. The university could invest in automatic body scanners and vending machines to cover gameday operations for $193.000 (note that the equipment has no MV after the 10-year life). If VT purchases this equipment, it will be depreciated using SL depreciation to a terminal BV of zero after 10 years. The equipment would still cost 572.000 per year for maintenance and operation. Virginia Tech has an effective income tax rate of 30% and expects that invested capital will earn at least 10% after income taxes are taken into account.
- Use the IRR method to determine if the equipment is a justifiable investment.
- If MACRS (seven-year recovery period) had been used in Part (a). Would the after-tax IRR be lower or higher than your answer to Part (a)?
a The after-tax IRR under SL method % . (Round to one decimal place.)
The gameday equipment a justifiable investment.
- The after-tax IRR under the MACRS method is %. (Round to one decimal place).
For this situation the after-tax IRR under the MACRS method is than under the SL method.
Enter your answer in each c the answer boxes