Question
Beauty Corp. is planning to add manufacturing capacity by installing new high-tech machines. The machines would increase revenues by $200,000 per year and increase costs
Beauty Corp. is planning to add manufacturing capacity by installing new high-tech machines. The machines would increase revenues by $200,000 per year and increase costs by $50,000 per year. The new machines cost $560,000 and would fully depreciated at the time of purchase. Investment in net working capital of $30,000 would be required at the time of installation. The firm is planning to keep the machines for 7 years and then sell them for $80,000. The firm has a required rate of return on investment projects of 13% and a marginal tax rate of 25%. What is the initial outlay in the year zero? Find the annual cash flow? Find the terminal cash flow? Calculate the NPV of the above project.?
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