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Please answer Part a and b Holmes Manufacturing is considering a new machine that costs $290,000 and would reduce pretax manufacturing costs by $90,000 annually.
Please answer Part a and b
Holmes Manufacturing is considering a new machine that costs $290,000 and would reduce pretax manufacturing costs by $90,000 annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $24,000 at the end of its 5-year operating life. Net operating working capital would increase by $28,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 25%, and a 13% WACC is appropriate for the project.
- Calculate the project's NPV. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the project's payback. Do not round intermediate calculations. Round your answer to two decimal places. years
- Assume management is unsure about the $90,000 cost savings-this figure could deviate by as much as plus or minus 20%. What would the NPV be under each of these situations? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. 20% savings increase: $ 20% savings decrease: $
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