20 The Boardof Directors of National Brewing Inc is considering the acquisition of a new still The still is priced at $600,000 but would require $60,000 in transportation costs and $40,000 for installation The still has a useful life of 7 years but will be depreciated over its 5 yearMACRS life The applicable MACRS depreciation rates are 20 , 32 , 19 , 12 , 11 , and 6 It is expected to have a salvage value of $10,000 at the end of 7 years The still would increase revenues by $220,000 per year and increase annual operating costsby $20,000 per year Additionally, the still would require a $30,000 increase in net operating working capital The firms marginal tax rate is 40 , and the projects cost of capital is 10 a What is the initial investment outlay for the project, that is, what is the Year 0 project cash flow b What are the projects annual cash flows in Years 1, 2, 3, 4, 6, and 7 c What is the projects NPV NO EXCEL PLEASE NO EXCEL PLEASE NO EXCEL PLEASE NO EXCEL PLEASE 20 The Board of Directors of National Brewing Inc is considering the acquisition of a new still The still is priced at $600,000 but would require $60,000 in transportation costs and $40,000 for installation The still has a useful life of 7 years but will be depreciated over its 5 year MACRS life The applicable MACRS depreciation rates are 20 , 32 , 19 , 12 , 11 , and 6 It is expected to have a salvage value of $10,000 at the end of 7 years The still would increase revenues by $220,000 per year and increase annual operating costs by $20,000 per year Additionally, the still would require a $30,000 increase in net operating working capital The firm's marginal tax rate is 40 , and the project's cost of capital is 10 a What is the initial investment outlay for the project, that is, what is the Year 0 project cash flow b What are the project's annual cash flows in Years 1, 2, 3, 4, 6, and 7 c What is the project's NPV

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20.The Boardof Directors of National Brewing Inc. is considering the acquisition of a new still. The still is priced at $600,000 but would require $60,000

image text in transcribed 20.The Boardof Directors of National Brewing Inc. is considering the acquisition of a new still. The still is priced at $600,000 but would require $60,000 in transportation costs and $40,000 for installation. The still has a useful life of 7 years but will be depreciated over its 5-yearMACRS life. The applicable MACRS depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to have a salvage value of $10,000 at the end of 7 years. The still would increase revenues by $220,000 per year and increase annual operating costsby $20,000 per year. Additionally, the still would require a $30,000 increase in net operating working capital. The firms marginal tax rate is 40%, and the projects cost of capital is 10%. a. What is the initial investment outlay for the project, that is, what is the Year 0 project cash flow?b. What are the projects annual cash flows in Years 1, 2, 3, 4, 6, and 7?c. What is the projects NPV?

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20.The Board of Directors of National Brewing Inc. is considering the acquisition of a new still. The still is priced at $600,000 but would require $60,000 in transportation costs and $40,000 for installation. The still has a useful life of 7 years but will be depreciated over its 5-year MACRS life. The applicable MACRS depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to have a salvage value of $10,000 at the end of 7 years. The still would increase revenues by $220,000 per year and increase annual operating costs by $20,000 per year. Additionally, the still would require a $30,000 increase in net operating working capital. The firm's marginal tax rate is 40%, and the project's cost of capital is 10%. a. What is the initial investment outlay for the project, that is, what is the Year 0 project cash flow? b. What are the project's annual cash flows in Years 1, 2, 3, 4, 6, and 7? c. What is the project's NPV