Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(Now project anolysis) Raymobile Motors is considering the purchase of a new production machine for 5500 . 000. The purchase of this mactine aill result

image text in transcribed
(Now project anolysis) Raymobile Motors is considering the purchase of a new production machine for 5500 . 000. The purchase of this mactine aill result in an increase in earnings before interest and taxes of $160.000 pet year. To operate this machine property workers would have to go through a buriof training session that would cost 5.95. 000 after twes it would cost $5,000 to install the machine properfy. Also, because the machine is extremoly ofscient, its purchase would necessitate an increase in inventory of 545 . 000 . This machine has an expected bife of 10 years, affer which it will have no salvage value. Assume simplified straight line dopreciation and that this machine is boing depreciatod down to taro, a 34 percent marginal tax rate; and a required rate of return of 17 percent. a. What is the initial outlay associated with this project? b. What are the annual after-tax cash flows associated with this project for years 1 theugh 9 ? c. What is the teeminal cash fow in year 10 (what is the annual after tax cach flow in year 10 plus any additionat cash flows assocated with the termination of the projercy? d. Should the machine be purchased? a. What is the initial outlay associated with this project? (Round to the nearest dollar) b. What are the annual aftertax cash flowb assoclated with this project for years f through 9 (note that the cash flows for years 1 through 5 are squal?? (Round to the nearest dollar) C. What is the terminal cash flow in yeer 10 (what is the annual ateectex cath fow in year 10 plus any additional cash kows associated with the saimination of fie propect? (Round to the nearest dollar) d. What is the project's NPV given a required rate of relum of 17 percent

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Business Finance

Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett

12th Edition

0136096689, 978-0136096689

More Books

Students also viewed these Finance questions

Question

Explain this statement: Goals are dreams with deadlines.

Answered: 1 week ago

Question

Explain the various kinds of retirement plans.

Answered: 1 week ago

Question

Explain workplace flexibility (work-life balance).

Answered: 1 week ago

Question

Discuss global issues in employee benefits.

Answered: 1 week ago