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PLEASE ANSWER ALL PARTS OF THE QUESTION!!!!!!!! 1A-1D Chapter 12 1.) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The
PLEASE ANSWER ALL PARTS OF THE QUESTION!!!!!!!! 1A-1D
Chapter 12 1.) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of $70,000 per year. The machine has a purchase price of $250,000, and it will cost an additional $10,000 to install this machine correctly. In addition, to operate this machine properly, inventory must be increased by $15,000. This machine has an expected life of 10 years, after which time it will have no salvage value. Assume the equipment will be equally depreciated (straight-line method) over the 10 years of use. The company has a 34% marginal tax rate, and a required rate of return of 15%. a. What is the initial cash outlay associated with this project (FCF in Year 0)? (3 points) b. What are the annual net cash flows associated with this project for Years 1 through 9 (FCF in Year 1 - 9)? (3 points) c. What is the terminal cash flow in year 10 (FCF in Year 10)? (4 points) d. Determine the project's NPV. (5 points)Step by Step Solution
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