Question
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's total price including
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's total price including installation and delivery is $90,000. The machine falls into the three-year class using straight-line depreciation method, and it will be sold after three years for $0. The use of this new machine will bring revenue of $40,000 for the first year, $45,000 for the second year, and $50,000 for the third year. The annual maintenance expense of $5,000 for the first year, $6,000 for the second year, and $7000 for the third year. The firm's marginal tax rate is 21 percent and the required rate of return is 10%. a. What is the initial investment at t=0 ? (keep your number as a whole number: example of answer format: $1,000 or if it's negative, then -$1,000.00) b. What is the Cash Flow at year 1 ? ( keep your number as a whole number: example of answer format: $1,000 or if it's negative, then -$1,000.00) c. What is the Cash Flow at year 3 ? ( keep your number as a whole number: example of answer format: $1,000 or if it's negative, then -$1,000.00) d. What is NPV ? ( keep your number to two decimals: example of answer format: $1,000.00 or if it's negative, then -$1,000.00)
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