Question

Amazing Manufacturing, Inc., has been considering the purchase of a new manufacturing facility for $570,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value at that time. Operating revenues from the facility are expected to be $425,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 4 percent. Production costs at the end of the first year will be $270,000, in nominal terms, and they are expected to increase at 5 percent per year. The real discount rate is 7 percent. The corporate tax rate is 23 percent.

   

Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

& Purchase of asset : $570,000. usage life = years. Operating revene - $ 425,000 for one yuar & 270,000 production cost Infahon cost Expected rat of = = 4 7 = 5% ex 23 . Tau cos AE operating revenues a production costs Year here the personne s Corpet Productos 1 4%. $425,000/ 51. $270,000 47. 442,000 57 283500 459,680 299675 44478067 312559 47 497190/51 1517077 15% 7 47 534761 44. sy 328187 344596 36,826 51. slu Deprecration - cost of Machinaly usage life & 570,000 -0 =81428.57

year Cast How $ 425,000 Utmutatiu Cashse . Production costs Brongnation & 270,000 $155000 $8142917357 $56649 if lehet - dl mit 184079 Deprecen Gasth Cach flow cash flow to the latter fan aft depr 442,000 & 283500 15850081429 4707 59345 11407 353)|456649 $138078 459,680 297675 16200381429 /80576|62044 1434 73 1478067 312,559 165508/81429 Guru1146170 1497,190 328187 p&gooselung 83534 6943a 14886] 1517,077 344,596 (142481/eing glos los tollo IS1530 153776) 1 361826. |175935/81429/94506 72770 15ulga 6

yras y دم درا calculation of Met proft Py factor Cashflow | presetvalus 0.934 $138078 $ 128,965 0.873 1140,774 | 122,896 10.816 [143,473 117074 10.763 [146,170 111528 10.713 14886) 10.666 151,539 100925 10.622 154,199 Cumulative of $ 78.3, 438 م 106138 م و 1 95912 له Les Inihal Inverter & ($70,000) Mpy = f 213,438 $ 213438 Net presutvale -

klorkry note Anout xxx 21 (xxx) 1 xxx I dep P ele pastulan - Operating revenu b) Les production cost c) Operating revenue before. do Les Depreciation e) operating revence after dep P) Ley Там (а дJ. & Add dep h . Cash flow for you xX Y XX