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Intro It costs $85,000 to purchase and install a new machine that will let the company cut costs for 6 years. The machine will be
Intro It costs $85,000 to purchase and install a new machine that will let the company cut costs for 6 years. The machine will be depreciated linearly to zero over 10 years, and can be sold for $12,750 after 6 years. Every year starting right now, the project requires an investment of $5,000 for net working capital. After 6 years, the stock of net working capital will be recouped. The marginal tax rate is 35% and the required return is 8%. Part 1 Attempt 1/10 for 10 pts. What is the after-tax salvage value of the machine in year 6 ? Part 2 Attempt 1/10 for 10 pts. What is the present value of operating cash flows (EBIT(1-t) + Dep.) to break even? Part 3 Attempt 1/10 for 10 pts. At what level of annual operating cash flows (OCF) does the project break even? At what level of annual cost savings does the project break even
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