Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
(New project anaywis) Rapmobie Motors is considering the purchase of a new production machine for $500,000. The purchase of fis machine wil result in an
(New project anaywis) Rapmobie Motors is considering the purchase of a new production machine for $500,000. The purchase of fis machine wil result in an increase in earnings before intereat and taies of $130,000 per year To operate this machine propery, workers would have to 90 through a brinf training session that would cost $25,000 after taines. It would cost $6,000 to install the machine properly. Asgume simplifed straight dine depreciation and that this machine is being depreciated down to zero, a 33 percont marginal tax rale, and a required rash of retarn of 17 percent. a. What is the intial oulloy associated with this projoct? b. What are the annual after-tax cash flows associated with this project for years 1 grough 97 ? c. What is the terminal cash fow in year 10 (what is the aroual affer-tac cash fow in year 10 plus any adotional cash flows associated wath the termination of the project)? d. Should the machine be purchased? a. What is the initial outiay associated with this propect? (Round to the nearest doliar) b. What aro the annuat after tax cash fown ascocialed weh this preyect for years 1 through 9 (nate that the cash fown for yeare 1 through 9 are equal?? (Round to the nearest dollaf.) 1 (Round to the nearest doiar.) d. What is the projects NeV given a reauired rate of fetern of 17 percent? (Rourd to the nearest dollar) Should the machine be purchased? (Select the best choice beliow.) A. No. The projects NPV ia negative. B. Yes. The pecjecrs NPV as positive
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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