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Income Statement 0 1 2. 3 Revenues Expenses O&M Depreciation Debt Interest Taxable income Income Taxes Net Income Cash Flow Statement 0 1 2. 3 Operating Activities Net Income Depreciation Investment Activities Investment Salvage Value Gains Tax Working capital Financing Activities Borrowed Funds Principal Payment Net Cash Flow Problem (25 points) - Read ALL the information carefully . Consider the following information about a new machine: The machine initial cost is $145,000 and it will be used for 3 years. The machine will be depreciated using MACRS 5-year class property. At the end of the third year, the machine will be sold at $X (read below to know the value of X). The firm will invest $20,000 in working capital (fully recoverable at the end of the project life). The expected annual savings on labor and materials due to the new machine are $73,000. Operating and maintenance costs are $17,000 annually. The firm will finance 40% of the machine money from an outside financial institution at an interest rate of 10%. The firm is required to repay the loan with 3 equal annual payments. The firm's tax rate is 40%. The firm's MARR is 15%. . . . With the above information, compute the present worth for this project. Is this a good investment? Why? Explain your answer clearly. X is 60 followed by the last three digits of your student ID number (remember that your student ID number has 7 digits, not only the 6 digits used in your email address). Examples: If your student ID number is 1234567 X will be $ 60,567. If your student ID number is 1234555 X will be $60,555. That means that each one of you will have a different problem. Show all your calculations and explain every step. Always use factor notation. Complete the income and cash flow statements. You need to submit both statements plus all the calculations involved in the numbers you introduce in these statements, YOUR SOLUTION MUST BE COMPLETE. YOU MUST EXPLAIN ALL THE Income Statement 0 1 2. 3 Revenues Expenses O&M Depreciation Debt Interest Taxable income Income Taxes Net Income Cash Flow Statement 0 1 2. 3 Operating Activities Net Income Depreciation Investment Activities Investment Salvage Value Gains Tax Working capital Financing Activities Borrowed Funds Principal Payment Net Cash Flow Problem (25 points) - Read ALL the information carefully . Consider the following information about a new machine: The machine initial cost is $145,000 and it will be used for 3 years. The machine will be depreciated using MACRS 5-year class property. At the end of the third year, the machine will be sold at $X (read below to know the value of X). The firm will invest $20,000 in working capital (fully recoverable at the end of the project life). The expected annual savings on labor and materials due to the new machine are $73,000. Operating and maintenance costs are $17,000 annually. The firm will finance 40% of the machine money from an outside financial institution at an interest rate of 10%. The firm is required to repay the loan with 3 equal annual payments. The firm's tax rate is 40%. The firm's MARR is 15%. . . . With the above information, compute the present worth for this project. Is this a good investment? Why? Explain your answer clearly. X is 60 followed by the last three digits of your student ID number (remember that your student ID number has 7 digits, not only the 6 digits used in your email address). Examples: If your student ID number is 1234567 X will be $ 60,567. If your student ID number is 1234555 X will be $60,555. That means that each one of you will have a different problem. Show all your calculations and explain every step. Always use factor notation. Complete the income and cash flow statements. You need to submit both statements plus all the calculations involved in the numbers you introduce in these statements, YOUR SOLUTION MUST BE COMPLETE. YOU MUST EXPLAIN ALL THE
