For this question start fresh, do not carry over data from earlier questions. You are...
80.2K
Verified Solution
Link Copied!
Question
Finance
For this question start fresh, do not carry over data from earlier questions. You are analyzing the prospects of installing cost saving machinery. You have the following information:
The machine costs $96,000. Depreciation is calculated straight line (equal amounts) over 4 years.
Every year the machine increases cash flows by an amount 34,000. (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?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
