(11–12)

New-Project Analysis Madison Manufacturing is considering a new machine that costs $250,000 and would reduce pre-tax manufacturing costs by $90,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $23,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45%, 15%, and 7%, as discussed in Appendix 11A. Working capital would increase by $25,000 initially, but it would be recovered at the end of the project’s 5-year life. Madison’s marginal tax rate is 40%, and a 10%

WACC is appropriate for the project.

a. Calculate the project’s NPV, IRR, MIRR, and payback.