1.A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

What is the Cash Flow for Year 0?

Enter as a whole dollar amount, don't include the $ sign, if negative, but a minus sign in front of the number.

2.Use this information for the remainder of the quiz questions.

A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

What is the Cash Flow for each year when calculating years 1-9?

Enter as a whole dollar amount, don't include the $ sign, if negative, but a minus sign in front of the number.

3.A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

What is the Cash Flow for each year when calculating year 10?

Enter as a whole dollar amount, don't include the $ sign, if negative, but a minus sign in front of the number.

4.A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

Calculate the investment's Net Present Value (NPV).

Enter as a whole dollar amount, don't include the $ sign, if negative, but a minus sign in front of the number.

5.A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

Calculate the investment's Internal Rate of Return (IRR).

Enter a percentage to 2 decimal places, do not include the % sign.

6.A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated 10 year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A's life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and pays taxes at a 21% rate.

Should the company purchase Machine A?