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Market Rate: 10% Company X will get a machine that costs $4,000 today. Machine has a lifetime of 4 years and will depreciate straight-line to
Market Rate: 10% Company X will get a machine that costs $4,000 today. Machine has a lifetime of 4 years and will depreciate straight-line to zero at the end of its life. Tax rate is 20%. The cash flow that the machine will create has the following details: Revenue Per Year = Price*Quantity Cost Per Year = Variable Cost* Quantity + Fixed Cost where Price=10, Variable Cost is 2, and Quantity is 1,600 units, and fixed cost is $500. Company thinks the current NWC does not need to be increased in the face of the increased activity. What is the NPV? (Clearly calculate the cash flow corresponding to years 0.1,2,3,and 4. Show your work.) Part II: What is the annual accounting and financial break-even quantities
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