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XOM inc. has completed the analysis of new machine and estimated the following cash flows. At the end of year 4, firm will complete the
XOM inc. has completed the analysis of new machine and estimated the following cash flows. At the end of year 4, firm will complete the project and liquidate the equipment. The equipment originally cost $5M, and production and sales will require an initial $2 million investment in net operating working capital. Modification of new equipment will cost additional $1 million. At the end of year 4, 75% of the machine's original cost is depreciated. The salvage value of the equipment is $3M and tax rate is 40%.
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