Requirement 1

present value factor table

present value annuity factor table

MACRS depreciation schedual

Requirement 2

The general manager of a Nebraska mining company has a chance to purchase a new drill at a total cost of $450,000. The recovery period is 5 years. Additional annual pretax cash inflow from operations is $75,000, the economic life of the drill is 5 years, there is no salvage value, the income tax rate is 40%, and the after-tax required rate of return is 16%. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the selected MACRS depreciation schedule.) Read the requirements. Requirement 1. Compute the NPV, assuming MACRS depreciation for tax purposes. Should the company acquire the drill? Begin by calculating the present value of the after-tax cash savings from depreciation on the drill. (Round dollar amounts to the nearest whole number. Enter the present value factor to four decimal places, "X.XXXX.") Present Value of $1 Cash Total Present at 16% Inflow Value Present value of lump sum after- tax cash savings from depreciation Year 1 11 Year 2 Year 3 Year 4 Year 5 Present Value of $1 Period 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 1 2 .9709 .9615.9524 9434 9346.9259.9091 .8929.8772.8621 .8475.8333 9426.9246 9070 8900 8734 .8573.8264 7972 .7695.7432 .7182.6944 .9151 .8890 8638 8396 .8163.7938.7513.7118 .6750 .6407 .6086 .5787 3 4 .8885.8548 .8227 .7921.7629 .7350 .6830 .6355 .5921.5523 .5158 .4823 5 .8626 8219 .7835 .7473.7130 .6806.6209.5674.5194.4761 .4371 .4019 .8375 7903 .7462 .7050 .6663.6302 5645 .5066 .4556 4104 3704 .3349 6 7 .8131 7599 .7107 .6651 .6227 .5835 .5132 .4523.3996 .3538 .3139 2791 8 .7894 7307 6768 6274 5820 5403 4665 4039 3506.3050 .2660 2326 .7664 7026 .6446 .5919 5439.5002 .4241.3606.3075.2630 .2255.1938 9 10 .7441 6756 .6139 .5584 5083 .4632 3855 .3220 .2697 .2267 .1911 1615 12 .70146246 .5568 4970 4440 .3971.3186 .2567 2076.1685 1372 1122 15 .6419 .5553 .4810 .4173.3624 3152 2394 1827.1401.1079 0835 .0649 18 20 25 .5874_4936 .4155 .3503 2959 2502 .1799.1300 .0946.0691 0508 0376 .5537 4564 3769 .3118 2584 2145.1486 1037 .0728 .0514 0365 0261 4776 3751 .2953 2330 1842 .1460 0923.0588 .0378.0245 .0160.0105 4371 .3335 2551 .1956.1504.1159 .0693.0419 .0255 .0157 .0097 .0061 4120 3083 2314 1741.1314.0994 0573.0334 .0196 0116 0070 .0042 28 30 Data Table