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Zimlick, Inc, a US pasta - machine manufacturer, is considering a $ 2 . 1 million device from United Technologies Corporation to automate pasta -
Zimlick, Inc, a US pastamachine manufacturer, is considering a $ million device from United Technologies Corporation to automate pastamachine quality inspection.
The device will be depreciated according to the straightline method over three years. The useful life of the device is years, with an estimated sale value at year of $ The project will allow less pasta machines to be scrapped because of low quality, generating pretax earnings of $ per year, and will not change the risk level of the firm. Zimlicks cost of capital is The tax rate is
Q Show a forecast of the cash flows for the project
Q What is the net present value of the project?
Q What is the IRR of the project?
Q Would you undertake the investment? Why or why not?
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