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please show me all the steps and formula Houston Company is considering adding a new line to its product mix and the capital budgeting analysis
please show me all the steps and formula
Houston Company is considering adding a new line to its product mix and the capital budgeting analysis is being conducted by an MBA student. The production line would be set up in unused space in Houston main plant Zero opportunity cost), Total cost of the machine is $190,000. The machinery has an economice of 4 years, and MACAS will be used for depreciation. The machine will have a salvage value of $30,000 after 4 years The new line will generate Sales of 1.300 units per year for 4 years and the variable cost per unit is 5100 in the first year. Each unit can be sold for $200 in the first year. The sales price and variable cost is expected to increase by per year due to inflation Further, to handle the new line, the networking capital would have to increase by 530,000 at time zero (The NWC will be recouped in year 4) The firm's tax rate 40 and its weighted average cost of capitalistom 1. What are the annual depreciation expenses for years 1 through 47 2. Calculate the annual sales revenues and costs (other than depreciation for years 1 through 4 3. Estimate annual Year 1 through 4) operating cash flows 4. Estimate the after-tax salvage value of the machine (Net salvage value) 5. Estimate the cash flow of this project 6. Estimate the NPV SRR. MIRR and profitability Index of the project Step by Step Solution
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