Question
Redo problem #4 assuming immediate 100% Bonus Depreciation for the packaging machine. (Problem 4. The Western Continental Shipping Corporation is evaluating the proposed acquisition of
Redo problem #4 assuming immediate 100% Bonus Depreciation for the packaging machine. (Problem 4. The Western Continental Shipping Corporation is evaluating the proposed acquisition of a new packaging machine. The machines base price is $240,000 and it would cost another $10,000 to modify it for its special use. The machine falls into the MACRS 3-year class, and it would be sold at the end of year 3 for $20,000. The machine would require $5,000 increase in net working capital for spare parts, and because it would lower the amount of goods damaged during shipping, it would increase the firms EBITDA by $120,000 per year for three years. The Western Continental Shipping Corporation has a marginal tax rate of 25% and uses 10% as its weighted average cost of capital. Calculate the NPV for this project. Calculate the Modified Internal Rate of Return for this project.
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