Question
Assume everything is given in n=0, CONSTANT dollars unless otherwise stated : Hartsfield Company is considering purchasing a set of machine tools at a cost
Assume everything is given in n=0, CONSTANT dollars unless otherwise stated:
Hartsfield Company is considering purchasing a set of machine tools at a cost of $60,000. The purchase is expected to generate revenues of $26,000. The purchase of the tools will also lead to higher operating costs of $8,000 per year in each of the next three years. Additional profits will be taxed at a rate of 30%. The asset falls into CCA Class 45 (rate = 40%) for tax purposes and the 50% rule applies. The project has a three-year life. The constant-dollar market (re-sale) value of the machine tools is expected to fall by 40% annually. The company will require a working capital of $8,000 to be maintained in purchasing power over the lifetime of the project and can be recovered at the time of the projects completion.
The general inflation rate is 6% per year (and affects everything that it normally affects). Assume a MARR =5%.
(Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar. Note: .5 rounds up)
The NPW of the project of the project is within $50 of
options:
| -6021 |
| -11475 |
| -8571 |
| -13025 |
| -6859 |
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