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XYZ Manufacturing is considering the acquisition of a new machine to expand its production capacity. The machine costs $ 2 , 5 0 0 ,

XYZ Manufacturing is considering the acquisition of a new machine to expand its production capacity. The machine costs $2,500,000 and has a useful life of 8 years with no salvage value. It is expected to generate additional revenues of $800,000 per year. Operating expenses, excluding depreciation, are projected to be $200,000 per year. The company uses straight-line depreciation and is subject to a 30% corporate tax rate. XYZ's cost of capital is 12%.
Calculate the following:
The annual depreciation expense.
The after-tax operating cash flows.
The Net Present Value (NPV) of the project.
The Internal Rate of Return (IRR).
The Modified Internal Rate of Return (MIRR).
Should XYZ Manufacturing proceed with the acquisition of the new machine?

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