a. Determine the initial cash flow required by the new press.

Calculate the initial cash flow will be:(Round to the nearest dollar.)

Installed cost of new press			$
Proceeds from sale of existing press	$
Taxes on sale of existing press	$
Total after-tax proceeds from sale			$
Initial cash flow			$

b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.)

Calculate the periodic cash inflows attributable to the new press below:(Round to the nearest dollar.)

Operating Cash Inflows
Year	1
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	2
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	3
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	4
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	5
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	6
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

c. Determine the payback period.

The payback period for this project is

nothing

years. (Round to one decimal place.)

d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press.

The net present value is

$nothing.

(Round to the nearest dollar.)

The internal rate of return is

nothing%.

(Round to one decimal place.)

e. Make a recommendation to accept or reject the new press, and justify your answer.(Select from the drop-down menus. Round the NPV amount to the nearest dollar. Round the IRR value to one decimal place.)

The NPV is a

positive

negative

$nothing

and the IRR of

nothing%

is well

above

below

the cost of capital of

10.8%.

Based on both decision criteria, the project

should not

should

be accepted.

Integrative: Complete Investment decision Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.19 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $0.99 million 10 years ago, and can be sold currently for $1.22 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.62 million higher than with the existing press, but product costs (excluding depreciation) will represent 50% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACRS B using a five-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 10.8%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) i Data Table X 6.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% *Thaca narcantzans have been rounded to the nearest wbolo pareant to cimlifurcalculations while 6.) 100%