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6. Donuts R Done wants to expand its donut business by purchasing a new donut machine that costs $500,000 and will be depreciated on a
6. Donuts R Done wants to expand its donut business by purchasing a new donut machine that costs $500,000 and will be depreciated on a straight-line basis to $0 over the 5-year life of this project. It is estimated that this machine will have a scrap value of $20,000 after five years. This project requires an additional $22,000 for net working capital. The operating cash flows projected for this project are 150,000 a year, the discount rate is 10 percent and the tax rate is 30 percent. What is the net present value of this project? (ANSWER $68,971.18) Why book value is 0? What is the internal rate of return for this project? (ANSWER 14.90%)
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