Question
Jubilee Corporation is considering the purchase of a new machine costing 100000. Sales tax on the machine is 6%. Freight costs to have the machine
Jubilee Corporation is considering the purchase of a new machine costing 100000. Sales tax on the machine is 6%. Freight costs to have the machine delivered will be $1000. Installation and setup costs will be an additional $3000.
1. What is the net present value of the initial investment?
This machine has a useful life of 5 years. IF the new machine is purchased pretac cash flows are as follows
year Inflow outflow
1 40500 18000
2 50400 27000
3 44100 22500
4 40500 20700
5 37200 18000
Jubilees cost of capital is 10% and its tax rate is 30%.
2. Calculate the after tax net present value of the estimated cash flows.
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