Integrative Complete Investment decision Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2 22 million. This outay would be partly offset by the sale of an existing press. The old press has zero book value, cost $0.99 million 10 years ago, and can be sold currently for $1.15 milion before taxes. As a result of acquisition of the new press, sales in each of the next years are expected to be $1.52 million higher than with the existing press, but product costs (excluding depreciation) wil represent 55% of sales. The new press will not affect the firm's networking ospital requirements The new press will be depreciated under MACRS im using a 5-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 11.3% (Note: Assume that the old and the new presses wil each have a terminal value of $0 at the end of year 6.) a. Determine the initial investment required by the new press b. Determine the operating cash flows attributable to the new press (Note: Be sure to consider the depreciation in year 6) c. Determine the payback period d. Determine the not present value (NPV) and the internal rate of return (RR) related to the proposed new pross, e. Make a recommendation to accept or reject the new pross, and justify your answer. Data Table a. Determine the initial investment required by the new press Calculate the initial investment will be (Round to the nearest dolar) Percentage by recovery year Recovery year 3 years 5 years 10 years Installed cost of new press 33% 20% 14% 10% Proceeds from sale of existing press $ 45% 32% 25% 18% 15% 19% 18% 14% Taxes on sale of existing press 5 7% 12% 12% 12% Total after-tax proceeds from sale $ 12% 946 9% 5% 9% 8% Initial investment $ 9% 7% 6% 9 6% 10 6% 11 49 Enter any number in the edit fields and then click Check Answer. Totals 100% 100% 100% 100% hambon munded to the whole Dentismo calculations w 7 years "The Up Integrative Complete Investment decision Wells Printing is considering the purchase of a new printing Sress. The total installed cost of the press is $2.22 milion. This outy would be partially offset by the sale of an existing press. The old press has zero book valuecost $0.99 million 10 years ago, and can be sold currently for $1.15 milion before aces. As a result of acquisition of the new press, sales in each of the next years are expected to be $1.52 milion higher than with the existing press, but product costs (excluding depreciation will represent 56% of sales. The new press will not affect the firm's not working capital requirements The new press will be depreciated under MACRS !! using a 5-year recovery period. The film is subject to a 40% tax rate. Wells Printing's cost of capital is 11.3%. (Note: Assume that the old and the new presses wil each have a terminal value of $0 at the end of year 6.) a. Determine the initial investment required by the new press. b. Determine the operating cash flows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.) c. Determine the payback period d. Determine the net present value (NPV) and the internal rate of retur (IRR) related to the proposed new press e. Make a recommendation to accept or reject the new press, and justify your answer 10 years 1 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 9% 7% 8 4% 6% 6% 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention