Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The machine falls into the MACRS 3-yr
Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The machine falls into the MACRS 3-yr class, (33%, 45%, 15%, and 7%) and it would be sold at the end of its 2-year operating life for $1,800. The machine would require an increase in net working capital by $2,000 when the machine is installed, but required working capital will return to the original level when the machine is sold after 2 years. Mars's marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature. If the machine costs $6,000 and the installation cost is $1,000, what is the project's NPV? If the answer is $123.45, enter 123.45 (two decimals)
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