Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your

image text in transcribed

Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine's base price is $11,100.00, and it would cost another $2,930.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net working capital (inventory) of $760.00. The new machine would not change revenues, but it is expected to save the firm $30,255.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 40.00%. If the project's cost of capital is 15.60%, what is the NPV of the project? Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. O $31,867.45 O $20,647.53 O $14,030.00 0 $25,175.28 O $11,100.00

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Building Your Future

Authors: Robert B. Walker, Kristy P. Walker

1st edition

9780077861728, 978-0073530659

More Books

Students also viewed these Finance questions