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Holmes Manufacturing is considering a new machine that costs $ 2 7 0 , 0 0 0 and would reduce pretax manufacturing costs by $
Holmes Manufacturing is considering a new machine that costs $ and would reduce pretax manufacturing costs by $ annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $ at the end of its year operating life. Net operating working capital would increase by $ initially, but it would be recovered at the end of the project's year life. Holmes's marginal tax rate is and a WACC is appropriate for the project.
Calculate the project's NPV Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent.
$
Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places.
Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places.
Calculate the project's payback. Do not round intermediate calculations. Round your answer to two decimal places.
years
Assume management is unsure about the $ cost savingsthis figure could deviate by as much as plus or minus What would the NPV be under each of these situations? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.
savings increase: $
savings decrease: $
Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the net operating working capital NOWC requirement. She asks you to use the following probabilities and values in the scenario analysis:
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