Question
The Fanar Computer company is considering whether or not to install a machine. The machine initial cost $460,000, shipping cost $30,000 and installation $10,000. The
The Fanar Computer company is considering whether or not to install a machine. The machine initial cost $460,000, shipping cost $30,000 and installation $10,000. The machine can be depreciated using MACRS as a 5-year asset. (MACRS depreciation rates for a five-year asset: 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%.) The machine is expected to last for five years, at which time management expects to sell it for parts for $100,000. The machine is expected to replace five employees in the shipping department, saving the company $150,000 each year. Fanar's tax rate is 30%.
a/What are the cash flows related to the acquisition of the machine?
b/What are the cash flows related to the disposition of the machine?
c/What are the net cash flows for each year of the machine's 5 year life?
d/What is the net present value of the machine investment if the cost of capital is 10%?
please clarify answers in Excel as it much easier for me to understand
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