part 2. should it invest in new equipment? explain using both NPV and IRR analysis

part 3. calculate the NPV and the IRR on the after-tax basis assuminh the company is in a 25% tax bracket (b) on ABC's tax return, the annual depreciation on the machine will be $18000 (c) all of the $30000 annual cash savings in before-tax outloe arises from tax desuctible expenses and (d) the only recenue the comoany will generate is in the salvage scale

(Attached is an EXCEL spreadsheet approximating the format of Figures 8-1 and 8-2 in the textbook. I suggest you use it to show your work for Problems 1&3.) Mo-Quiz Problems Worksheet.xlsx ABC Company can borrow money at 6%. It is evaluating whether it should invest in a piece of machinery that will generate cash swings for the company of $30,000 per year for 10 years. At that point, the equipment will be worn out, but it can be scrapped for $20,000,00. The cost to purchase the machinery is $200,000.00, which will be a cash transaction (a) Using the textbook tables, calculate the Net Present Value of this Investment (pre tax basis). (b) Using EXCELS NPV function, calculate the Net Present Value of this Investment (pre-tax basis) ( What is the internal rate of return on this investment (pre-tax basis)? Clipboard R14 X fx HIJKLMNO 7 8 9 10 Worksheet for Module 6 (Problems 1 & 3) Problem 1: PRE-TAX ANALYSIS (Cash Flow) 3 YEAR 0 4 Buy Equip 5. Annual Savings 6 Salvage Value 7 Depreciation 8 TOTAL PV (using table) PV (using NPR function) 10 Rate: 11 Cash Out 12 Annual Savings 13 Salvage Value Net py: Problem 3: AFTER-TAX ANALYSIS 18 YEAR 0 2 3 4 5678910 5 6 19 Buy Equip 20 Annual Savings 21 Salvage Value 22 Depreciation 23 TOTAL 24 After tax Logic on Expenses : The investment saves money. It lowers cash outflow AND lowers deductible expenses. 25 When I lose the ability to claim expenses, taxable income goes up, so I pay more taxes. 26 Rate: PV (using table) PV (using NPR function) 27 Cash Out 28 Annual Savings 29 Salvage Value Annual Depr. Tax 30 Benefit Net Py IRR Sheet2