Problem 13 12 New Project Analysis Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre tax manufacturing costs by $110,000 annually Madison would use the 3 year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5 year operating life The applicable depreciation rates are 33 33 , 44 45 , 14 81 , and 7 42 Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5 year life Madison's marginal tax rate is 40 , and a 13 WACC is appropriate for the project Enter negative answers with minus sign Calculate the project's NPV Round your answer to the nearest dollar $ Calculate the project's IRR Round your answer to two decimal places Calculate the project's MIRR Round your answer to two decimal places Calculate the project's payback Round your answer to two decimal places Assume management is unsure about the $110,000 cost savings this figure could deviate by plus 20 Calculate the NPV over the five year period Round your answer to the nearest dollar $ Calculate the NPV over the five year period if this figure could deviate by minus 20 Round your answer to the nearest dollar $ Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the working capital (WC) requirement She asks you to use the following probabilities and values in the scenario analysis Scenario Probability Cost Savings Salvage Value WC Worst case 0 25 $ 88,000 $28,000 $40,000 Base case 0 45 110,000 33,000 35,000 Best case 0 30 132,000 38,000 30,000 Calculate the project's expected NPV Round your answer to the nearest dollar $ Calculate the project's standard deviation Round your answer to the nearest dollar $ Calculate the project's coefficient of variation Round your answer to two decimal places $

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Problem 13-12 New-Project Analysis Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would

Problem 13-12 New-Project Analysis

Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.42%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 13% WACC is appropriate for the project. Enter negative answers with minus sign.

Calculate the project's NPV. Round your answer to the nearest dollar. $ __________ Calculate the project's IRR. Round your answer to two decimal places. ___________ % Calculate the project's MIRR. Round your answer to two decimal places. ___________% Calculate the project's payback. Round your answer to two decimal places.
Assume management is unsure about the $110,000 cost savings - this figure could deviate by plus 20%. Calculate the NPV over the five-year period. Round your answer to the nearest dollar. $ ___________ Calculate the NPV over the five-year period if this figure could deviate by minus 20%. Round your answer to the nearest dollar. $ ____________
Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis:

Scenario Probability Cost Savings Salvage Value WC

Worst case 0.25 $ 88,000 $28,000 $40,000

Base case 0.45 110,000 33,000 35,000

Best case 0.30 132,000 38,000 30,000

Calculate the project's expected NPV. Round your answer to the nearest dollar. $ ___________ Calculate the project's standard deviation. Round your answer to the nearest dollar. $ ____________ Calculate the project's coefficient of variation. Round your answer to two decimal places. $_____________