Question
Holmes Manufacturing is considering a new machine that costs $230,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS
Holmes Manufacturing is considering a new machine that costs $230,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $26,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45%, 15%, and 7%. Net operating working capital would increase by $24,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 40%, and a 12% WACC is appropriate for the project. a.Calculate the project's NPV. Round your answer to the nearest cent. $ Calculate the project's IRR. Round your answer to two decimal places. % Calculate the project's MIRR. Round your answer to two decimal places. %
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