6) 10.23 A manufacturing company is consider- ing acquiring a new injection-molding machine at a cost of $150,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years, after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $11,000. The addition of the machine to the current production facility is generate an annual revenue of $48,000. The firm has only $100,000 available from its equity funds, so it must borrow the additional $50,000 required at an inter- est rate of 10% per year with repayment of princi- pal interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 40%. Assume that the asset qualifies for a seven- year MACRS property class. (a) Determine the after-tax cash flows. (b) Determine the NPW of this project at MARR = 14% and inte TABLE 9.6 MACRS Depreciation Schedules for Pe Convention, Declining-Balance Metho Class 3 5 7 n Depreciation Rate Year n 200% 200% 200% 1 1 33.33 20.00 14.29 2 2 44.45 32.00 24.49 3 14.81 19.20 17.49 3 4 7.41 11.52* 12.49 4 % 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% Dn 21,435 36,735 26,235 18,735 13,395 13,380 13,395 6,690 5 11.52 8.93* 6 5.76 8.92 5 7 8.93 6 8 4.46 9 7 10 11 8 Income Statement 0 2 3 4 6 7 8 Revenues Expenses O&M Depreciation Debt Interest Taxable Income Income Taxes Net Income 0 1 2 3 4 6 7 8 Cash Flow Statement Operating Activities Net Income Depreciation Investment Activities Investment Salvage Value Gains Tax Working capital Financing Activities Borrowed Funds Principal Payment Net Cash Flow