C & D

P12-16 (similar to) Question Help (Calculating project cash flows and NPV) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of 500.000 per year. The machine has a purchase price of $350,000, and it would cost an additional $6,000 after tax to install this machine correctly. In addition to operate this machine property, inventory must be increased by $12,000. This machine has an expected life of 10 years after which time it will have no salvage value. Also, assume simplified straight-line depreciation, that this machine is being depreciated down to zero, a 38 percent marginal tax rate, and a required rate of return of 14 percent a. What is the initial outlay associated with this project? b. What are the annual after-tax cash flows associated with this project for years 1 through 92 c. What is the terminal cash flow in year 10 (that is the annual after-tax cash flow in year 10 plus any additional cash flow associated with bermination of the project)? d. Should this machine be purchased? . The initial cash outlay associated with this project is $ 368000 (Round to the nearest dollar) b. The annual atter-tax cash flows associated with this project for years 1 through 9 are $ 85200 (Round to the nearest dollar) c. The terminal cash flow in year 10 (the annual after-tax cash flow in year 10 plus any additional cash flow associated with termination of the project) is $(Round to the nearest dollar)