Answered You can hire a professional tutor to get the answer.
QUESTION
You are analyzing the prospects of installing cost saving machinery. You have the following information: The machine costs $92,000.
You are analyzing the prospects of installing cost saving machinery. You have the following information:
- The machine costs $92,000. Depreciation is calculated straight line (equal amounts) over 4 years.
- Every year the machine increases cash flows by an amount 36,000. (Taxes, Opportunity Cost etc. have all been accounted for in this number. There is no Net Working Capital.)
- After 3 years (when the machine has only been depreciated for 3 years and therefore the book value is not zero) the machine is sold for $30,000. This, therefore, is a 3 year project.
- The rate of discount is 9%
- The tax rate is 40%.
- (Hint: Here you have to consider the income due to the salvage sale of the machinery and the taxes on this sale.)
What is the NPV of installing the machinery
