Question
I need help with this question. Mostly part B.... Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs
I need help with this question. Mostly part B....
Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 11% cost of capital is appropriate for the project.
A. Calculate the project's NPV. Round your answer to the nearest dollar.
$
Calculate the project's IRR. Round your answer to two decimal places.
%
Calculate the project's MIRR. Round your answer to two decimal places.
%
Calculate the project's payback. Round your answer to two decimal places.
B. Assume management is unsure about the $110,000 cost savings - this figure could deviate by as much as plus or minus 20%. Calculate the NPV if cost savings value deviate by plus 20%. Round your answer to the nearest dollar.
$
Calculate the NPV if cost savings value deviate by minus 20%. Round your answer to the nearest dollar.
$
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