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please note questions A-D:) thanks (New project analysis) Raymobile Motors is considering the purchase of a new production machine for $400,000. The purchase of this
please note questions A-D:) thanks
(New project analysis) Raymobile Motors is considering the purchase of a new production machine for $400,000. The purchase of this machine will result in an increase in earnings before depreciation, interest, and taxes (EBITDA) of $110,000 per year. To operate this machine properly, workers would have to go through a brief training session that would cost $45,000 after taxes. It would cost $5,000 to install the machine properly. Also, because the machine is extremely efficient, its purchase would necessitate an increase in inventory of $40,000. This machine has an expected life of 10 years, will be depreciated down to zero using the bonus depreciation method with that depreciation taking place in year 1. Assume a 21 percent marginal tax rate, and a required rate of return of 16 percent. What is the initial outlovacconiated with this nroinnt? a. What is the initial outlay associated with this project? $ (Round to the nearest dollar.) b. What is the after-tax cash flow associated with this project for year 1? 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, and 2 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 purchasedStep by Step Solution
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