Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help me with this question, and show me the work thank you Finance 4310 In-Class Problem X Company is considering the purchase of a

please help me with this question, and show me the work thank you

image text in transcribed Finance 4310 In-Class Problem X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup costs for the processor are estimated to be $15,000. X's working capital requirement is expected to increase by $17,000 when the new processor begins operation and is expected to be fully recoverable at the end of the project. The processor's useful life is expected to be 5 years and its salvage value at that point is estimated to be $25,000. Estimated revenues and expenses before tax for each year are shown in the table below. Year Revenues Operating Expenses 1 $87,000 $23,000 2 $82,000 $25,000 3 $93,000 $30,000 4 $87,000 $23,000 5 $88,000 $29,000 The processor will be depreciated to a zero book value using the following annual depreciation rates that are applied to the original installed cost. Year Depreciation % 1 15 2 22 3-5 21 Assume a tax rate of 35% and a cost of capital of 12%. Show the calculations for the initial outlay and the CFAT for each year. Then use your financial calculator to find the NPV and IRR for the project. Based on the NPV and IRR, should company X invest in the new processor

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Fundamentals of Cost Accounting

Authors: William Lanen, Shannon Anderson, Michael Maher

3rd Edition

9780078025525, 9780077517359, 77517350, 978-0077398194

Students also viewed these Finance questions