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9. The injection molding machines need to be replaced. The list is narrowed down to two options based on various parameters like screw diameter, injection

9. The injection molding machines need to be replaced. The list is narrowed down to two options based on various parameters like screw diameter, injection pressure, injection capacity, rate, rpm, etc. You are asked to make a recommendation based on the following financial information. The Cincinnati Milacron Plastic Injection Molding Machine costs $80,000 and the Kawaguchi machine costs $120,000. Based on the capacity of these machines, it can be safely estimated that the revenue for Cincinnati will be $30,000 for year 1 and $41,500 for Kawaguchi. It is also assumed that the capacity could be increased and thereby the revenue by 20% every year for the next few years. The maintenance costs for both machines will be $2,000 and the amount will increase by $5,000 every year for the next few years. According to other companies that use similar machines, these machines are capable of producing products for 5 years before major breakdowns occur. Since this is a rough estimate, you can use straight line depreciation over the next five years. The marginal tax rate for this company is 40%. a) Assuming an after-tax MARR of 15%, calculate the PW of the after-tax cash flow. b) Perform a sensitivity analysis by changing the after-tax MARR from 10% to 20%. Hint: You can use Excels DATA TABLE to facilitate calculations.

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