A)

Consider an asset that costs $396,000 and is depreciated straight-line to zero over its 8-year tax life. The asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $49,500.

Required :

If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.)

$470,262.00

$79,002.00

$83,160.00

$32,670.00

$87,318.00

B)

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $1,017,600 is estimated to result in $339,200 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $148,400. The press also requires an initial investment in spare parts inventory of $42,400, along with an additional $6,360 in inventory for each succeeding year of the project.

Required :

If the shop's tax rate is 32 percent and its discount rate is 15 percent, what is the NPV for this project? (Do not round your intermediate calculations.)

$-93,002.78

$-89,390.52

$-193,780.70

$-97,652.92

$-88,352.64