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just calculation,no excel,thanks 1. You are considering to purchase a machine that costs $100.000. Its value depreciates to zero using straight-line depreciation scheme over 4
just calculation,no excel,thanks
1. You are considering to purchase a machine that costs $100.000. Its value depreciates to zero using straight-line depreciation scheme over 4 years; you expect its market value to be $10,000 after 4 years. This machine is going to generate an increase in sales of 4,000 units. A unit price and cost are $30 and $20, respectively. An additional fixed cost of operating this machine is $5,000. Tax rate is 20%. The discount rate is 12%. There will not be any changes in net working capital. (b) Evaluate NPV of this idea. Should you buy this machine? Suppose that you want to do scenario analysis to make sure that your decision is right. You expect that unit price might fluctuate between $25 and $35. You also think that unit sales might be go as low as 3,000 and as high as 4,500. Finally, fixed costs might go up to $5,500 and down to $4,500. Finally, depending on the voting outcome in two years from now, tax rate might increase to 25% or decrease to 15% (this new tax rate will affect cash flows in years 3 and 4). Assuming that everything else stays the same, what is NPV in the best case Step by Step Solution
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