Please help!
BA380 Fall 2020 | 11/18/20 3:07 PM Homework: Ch 11b - Cash Flow and Other CB Topics Save Score: 0 of 2 pts 8 of 8 [7 complete) HW Score: 87.37%, 15.73 of 18 pts Problem 11-11 (similar to) Question Help 0 (New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $200.000. The purchase of this machine will result in an increase in earnings before interest and taxes of $40,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $6,000 after taxes. It would cost $5,000 to install the machine properly. Also, because this machine is extremely efficient, ils purchase would necessitate an increase in inventory of $30,000. This machine has an expected life of 10 years, after which it will have no salvage value. Finally, to purchase the new machine, it appears that the firm would have to borrow $100.000 at 11 percent interest from its local bank, resulting in additional interest payments of $11.000 per year. Assume simplified straight-line depreciation and that the machine is being depreciated down to zero, a 34 percent marginal tax rate, and a required rate of return of 11 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 through 9? c. What is the terminal cash flow in year 10 (what is the annual after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the project)? d. Should the machine be purchased? a. What is the initial outlay associated with this project? $ 241000 (Round to the nearest dollar) b. What are the annual after-tax cash flows associated with this project for years 1 through 9 (note that the cash flows for years 1 through 9 are equal)? S(Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. 2 parts 3 remaining Clear All Check Answer BA380 Fall 2020 | 11/18/20 3:07 PM Homework: Ch 11b - Cash Flow and Other CB Topics Save Score: 0 of 2 pts 8 of 8 [7 complete) HW Score: 87.37%, 15.73 of 18 pts Problem 11-11 (similar to) Question Help 0 (New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $200.000. The purchase of this machine will result in an increase in earnings before interest and taxes of $40,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $6,000 after taxes. It would cost $5,000 to install the machine properly. Also, because this machine is extremely efficient, ils purchase would necessitate an increase in inventory of $30,000. This machine has an expected life of 10 years, after which it will have no salvage value. Finally, to purchase the new machine, it appears that the firm would have to borrow $100.000 at 11 percent interest from its local bank, resulting in additional interest payments of $11.000 per year. Assume simplified straight-line depreciation and that the machine is being depreciated down to zero, a 34 percent marginal tax rate, and a required rate of return of 11 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 through 9? c. What is the terminal cash flow in year 10 (what is the annual after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the project)? d. Should the machine be purchased? a. What is the initial outlay associated with this project? $ 241000 (Round to the nearest dollar) b. What are the annual after-tax cash flows associated with this project for years 1 through 9 (note that the cash flows for years 1 through 9 are equal)? S(Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. 2 parts 3 remaining Clear All Check
