Question
The Sailwinds Manufacturing Company is considering buying a large format 3D printing system to print molds for sailboat hulls. The new system has a purchase
The Sailwinds Manufacturing Company is considering buying a large format 3D printing system to print molds for sailboat hulls. The new system has a purchase price of $6,500,000, an estimated useful life and MACRS class life of 7 years, and an estimated salvage value of $500,000. The system will enable the company to save on labor costs and quality control costs. A total annual savings of $450,000 will be realized each year and will increase by 5% for each year of the systems life if the 3D printing system is purchased. The company is in the 27% marginal tax bracket. The initial investment will be entirely financed with a conventional loan. The interest rate on the loan is 12% with the loan to be repaid in equal annual installments over the project life.
a. Determine the aftertax cash flows.
b. Evaluate this investment project by using a MARR of 20%, i.e. NPV, IRR
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