An in-depth analysis for aproposal to invest in a new machine has identified that,despite uncertainties in projections,the most probable annual operating costs would be $24,000 for generating $60,000 annual cash revenues. Initialinvestment for this new machine, including installation costs, is expected to be$100,000. Based on estimated economic life of 5 years and the advice of the corporate tax consultant, the original cost of the machine could be claimed as an annual depreciation expense using the straight line method .The tax implications of recovering a salvage value of $20,000 would apply to the final (5th)year. The corporate tax rate is set at 40% and the tax is paid in the year of income. The board has asked for an analysis of an appropriate discount rate but is content to use 10% at this stage.

Find the following:

1. Cash outflow at the beginning (round the answer to two-decimal places) =
2. Net Cash Flow in each of year 1to year4 (round the answer to two-decimal places) =
3. Net Cash Flow in the final (5th)year = (round the answer to two-decimal places)
4. NPV of the proposal (round the answer to two-decimal places)=
5. IRR of the proposal (round the answer in %to two-decimal places)=

Answer rating: 100% (QA)

Lets break down the analysis step by step Cash Outflow at the Beginning This is simply the initial i... View the full answer