Question
(Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered would
"(Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered would result in an increase in earnings before interest and taxes of $35,000 per year, it has a purchase price of $100,000, and it would cost an additional $5,000 after taxes to correctly install this machine. In addition, to properly operate this machine, inventory would have to be increased by $5,000. This machine has an expected life of 10 years, after which it will have no salvage value. Also, assume the use of the simplified straight-line method to depreciate this machine down to zero, a 34 percent marginal tax rate, and a required rate of return of 15 percent. What is the cash initial outlay associated with this project? What are the annual net cash flows associated with this project for Years 1 through 9? What is the terminal cash flow in Year 10 (what is the annual free cash flow in Year 10 plus any additional cash flows associated with termination of the project)? Should this machine be purchased?"
Answer : i need answer in excel with formulas
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started