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Question 7 25 pts You are considering the purchase of a new lathe for a project. Details of this potential purchase are provided below. The
Question 7 25 pts You are considering the purchase of a new lathe for a project. Details of this potential purchase are provided below. The project life is 3 years. Annual revenues are $13,000. Annual O&M costs (expenses) of the machine are $2,800. The machine costs $20,000. You will pay cash for 60% of this machine immediately, and will borrow the remaining 40% at a 10% annual rate compounded annually over 2 years. (See below for calculations on your payment plan.) The machine will be depreciated using a seven-year MACRS approach. Salvage value at the end of year 3 will be $6,500. Assume an income tax rate and gains tax rate of 21%. Enter the Net Present Worth of this project based on a MARR of 15%. To help you out, here are the calculations for repaying the amount that you will borrow: Year 1: Total payment = $4,610; Interest - $800; Principal = $3,810 Year 2: Total payment = $4,610; Interest = $419; Principal = $4,190 Table 9.6 MACRS depreciation schedules for personal properties.pdf D Blank cash flow statement 3.xlsx
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