Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 2

Advanced Anatomists, Inc., researchers in medical science, is contemplating a commercial venture concentrating on proteins based on the new X-ray technology of free-electron lasers. To recover the huge investment needed, an annual $2.5 million CFAT is needed. A favored average federal tax rate of 20% is expected; however, state taxing authorities will levy an 8% tax on TI. Over a 3-year period, the deductible expenses and depreciation are estimated to total $1.3 million the first year, increasing by $500,000 per year thereafter. Of this, 50% is expenses and 50% is depreciation. What is the required gross income each year