0 answer

New project analysis You must evaluate a proposal to buy a new milling machine

Question:

New project analysis You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500.
The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15, and 7 percent. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues,
but pre-tax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
a. How should the $5,000 spent last year be handled?
b. What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?
c. What are the net operating cash flows during Years 1, 2, and 3?
d. What is the terminal year cash flow?
e. Should the machine be purchased?
Explain your answer.

Answers

Similar Solved Questions

1 answer
37) 57) What would be the profit or loss per share of stock to an investor...
37) 57) What would be the profit or loss per share of stock to an investor who bought an October expiration Apple call option with an exercise price of $130 if Apple closed on the expiration date at S120? Assume the option premium was $3.00. A) $3.00 gain D) 57.00 gain...
1 answer
How can chirality influences or forms different conformations in case of vinyl polymers (‐CH2‐C*HR‐)n ?
How can chirality influences or forms different conformations in case of vinyl polymers (‐CH2‐C*HR‐)n ?...
1 answer
A round pipe of varying diameter carries petroleum from a wellhead to a refinery. At the...
A round pipe of varying diameter carries petroleum from a wellhead to a refinery. At the wellhead the pipe\'s diameter is 52.9 cm and the flow speed of the petroleum is 13.7 m/s. At the refinery the petroleum flows at 5.75 m/s. What is the volume flow rate of the petroleum along the pipe and wha...
1 answer
How do you evaluate #log_2 (0.25)#?
How do you evaluate #log_2 (0.25)#?...
1 answer
Amerfond, Inc. produced the basic fillings used in mango popular frozen desserts and treats--vanilla and chocolate...
Amerfond, Inc. produced the basic fillings used in mango popular frozen desserts and treats--vanilla and chocolate ice creams, puddings, meringues, and fudge. Amerfond used standard costing and Carrie's over no inventory from one month to the next. The ice cream product groups results for June 2...
1 answer
9a) To determine if the change in localization of EGFR impacts on the cell signaling outcomes...
9a) To determine if the change in localization of EGFR impacts on the cell signaling outcomes how could you prevent this from occurring? b) To determine if the turnover of EGFR impacts on the cell signaling outcomes how could you prevent this from occurring?...
1 answer
How do you solve #134= - 5( 5x - 7) - 1#?
How do you solve #134= - 5( 5x - 7) - 1#?...
1 answer
Welsh Gas is one of the largest utility companies in Wales. The company gathered quarterly data...
Welsh Gas is one of the largest utility companies in Wales. The company gathered quarterly data for the demand of Gas (in 100,000 cubic feet), reported in the following table Demand Quarterfor Gas Time Year 1481 1241 948 1286 1616 1361 975 1211 1755 1511 1132 1575 1965 1181 10 12 13 14 15 16 (a) The...
1 answer
Ch 13 Ex 13-6 i Saved Help Save & Exit Submit Check my work 1 Simon...
Ch 13 Ex 13-6 i Saved Help Save & Exit Submit Check my work 1 Simon Company's year-end balance sheets follow. 1 Yr Ago At December 31 Current Yr 2 Yrs Ago Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net 27,775 82,990 102,258 8,945 263,355 34,475 ...
1 answer
How do you simplify #sqrt( (1 - sqrt(2)/2) / 2 )#?
How do you simplify #sqrt( (1 - sqrt(2)/2) / 2 )#?...
1 answer
(Required) Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours....
(Required) Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 32,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $530,00...
1 answer
How do you simplify 9√6 ÷ 3√6?
How do you simplify 9√6 ÷ 3√6?...
1 answer
Player 2 C D C 300,300 -100,-100 Player 1 D -100,-100 1,0 Figure 1: A Flexible...
Player 2 C D C 300,300 -100,-100 Player 1 D -100,-100 1,0 Figure 1: A Flexible (?) Game (a) (5 points) Find a value for x in which there is only a single equilibrium (in pure strate- gies) of this game BUT there is no strictly dominant strategies. Be sure to demonstrate the NE....
1 answer
Write the net ionic equation for the precipitation reaction that occurs when aqueous solutions of manganese(II)...
Write the net ionic equation for the precipitation reaction that occurs when aqueous solutions of manganese(II) iodide and sodium sulfide are combined. Use the pull-down boxes to specify states such as (aq) or (s)....