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The president of Albatross Airlines has asked you to evaluate the proposed acquisition of a a new airplane. The aircraft price is $40,000 and it is classified in the 3-year MACRS class. The purchase of the plane would require an increase in net working capital of $2,000. The airplane would increase the firm’s before-tax revenues by $20,000 per year, but would also increase operating costs by $5,000 per year. The airplane is expected to be used for 3 years and then sold for $25,000. The firm’s marginal tax rate is 40% and the project’s cost of capital is 14%. Use the following MACRS rates for 3-year property: 33%; 45%; 15%; 7%

Select one:
a. 16200
b. 11840
c. 9000
d. 10240


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