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A manufacturing firm is considering the purchase of a certain machine center. The firm's MARR is 15%. The service life of the project is 6
A manufacturing firm is considering the purchase of a certain machine center. The firm's MARR is 15%. The service life of the project is 6 years. The machine center is depreciated using MACRS-7 and the marginal tax rate is 25%. Estimates for the other relevant parameters are as follows: Min Most Likely $100,000 10,000 $120 $500,000 $25,000 Max $110,000 $90,000 6,000 Initial investment Demand 12,000 Unit Price $80 $150 Annual Fixed Cost $350,000 $15,000 $600,000 $30,000 Annual Savings Variable cost / unit $45 $0 $75 $90 $35,000 Salvage Value $20,000 a) Determine the NPV for the most likely case b) Repeat the solution for the Best-case scenario c) Repeat the solution for the Worst-case scenario
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