MTM Inc., is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. MTM will use the straight-line method to depreciate the machine, and it expects to sell the machine at the end of its 5 year life for $10,000. The firm expects to be able to reduce working capital by $15,000 when the machine is installed. The firm’s marginal tax rate is 34% and it uses a 12% cost of capital to evaluate projects of this nature. If the machine costs $60,000, what is the NPV of the project’s cash flows? [-$23,685]
After a disastrous ski season last year, Valley, Inc., is considering the installation of a snow machine. The machine has an invoice price of $100,000, and it will cost $10,000 to install the machine. It is estimated that the machine will increase revenues by $25,303 annually, although operating expenses other than depreciation will also increase by $5,000. The machine will be depreciated on a straight-line basis over its useful life (10 years) to a zero salvage value. If the tax rate on ordinary income is 34%, what is the project’s IRR (approximately)? [IRR = 9%]
WRITE THIS ESSAY FOR ME
Tell us about your assignment and we will find the best writer for your paper.
Get Help Now!As the capital budgeting director for Harding Industries, Inc., you are evaluating the construction of a new plant. The plant has a net cost of $4.921 million in year 0, and it will provide net cash inflows of $1 million in year 1, $1.5 million in year 2, and $2 million in years 3 through 5. As a first approximation, you may assume that all cash flows occur at year-end. What is the plant’s approximate IRR? [IRR = 19%]
Ferrari of Ohio is considering the purchase of land and the construction of a new plant. The land, which would be bought immediately, has a cost of $100,000 and the building, which would be erected at the end of the year, would cost $500,000. It is estimated that the firm’s after-tax cash flow will be increased by $100,000 beginning at the end of the second year and this incremental flow would increase at a 10% rate annually over the next 10 years. What would be the payback period (approximately)? [6 years]
Two projects being considered are mutually exclusive and have the following projected cash flows:
Introducing our Online Essay Writing Services Agency, where you can confidently place orders for a wide range of academic assignments. Our reputable homework writing company specializes in crafting essays, term papers, research papers, capstone projects, movie reviews, presentations, annotated bibliographies, reaction papers, research proposals, discussions, and various other assignments. Rest assured, our content is guaranteed to be 100% original, as every piece is meticulously written from scratch. Say goodbye to concerns about plagiarism and trust us to deliver authentic and high-quality work.
WRITE MY ESSAY NOW
