Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Dorothy & George Company is planning to acquire a new machine at a total cost of $57,600. The machines estimated life is 6 years and
Dorothy & George Company is planning to acquire a new machine at a total cost of $57,600. The machines estimated life is 6 years and its estimated salvage value is $600. The company estimates that annual cash savings from using this machine will be $11,000. The companys after-tax cost of capital is 10% and its income tax rate is 40%. The company uses straight-line depreciation (non-MACRS-based). (Use Appendix C, Table 1 and Appendix C, Table 2.) (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round "Payback period" to 2 decimal places and all other answers to the nearest dollar amount.) Required: 1. What is this investments net after-tax annual cash inflow? 2. Assume that the net after-tax annual cash inflow of this investment is $9,000; what is the payback period in years? 3. Assume that the net after-tax annual cash inflow of this investment is $9,000; what is the net present value (NPV) of this investment? 4. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable (i.e., the dollar cost savings that would yield an NPV of $0)
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