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A firm is considering the purchase of a new machine at a price of $135,000. The machine falls into the three-year MACRS class. If the
A firm is considering the purchase of a new machine at a price of $135,000. The machine falls into the three-year MACRS class. If the new machine is acquired, the firm's investment in net working capital will immediately increase by $10,000 and then remain at that level throughout the life of the project. At the end of 3 years, the new machine can be sold for $16,000. Earnings before depreciation, interest and taxes (EBDIT) are expected to be as follows with respect to the new machine: Year 1: EBDIT = $58,000 Year 2: EBDIT = $75,000 Year 3: EBDIT = $85,000 The firm is subject to a 21 percent tax rate and the firm's discount rate is 9 percent. Requirement 4: What is the net cash flow of the project for each of the following years? (Do not round intermediate calculations. Net cash outflows should be indicated by a minus sign. Round your answers to the nearest whole dollar (e.g., 32).) Year Cash Flow 0 $ 2 3 Requirement 5: What is the NPV of the project? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV
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