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A division of Sunland Manufacturing is considering purchasing for $1,680,000 a machine that automates the process...

A division of Sunland Manufacturing is considering purchasing for $1,680,000 a machine that automates the process of inserting electronic components onto computer motherboards. The annual cost of operating the machine will be $56,000, but it will save the company $414,000 in labor costs each year. The machine will have a useful life of 10 years, and its salvage value in 10 years is estimated to be $336,000. Straight-line depreciation will be used in calculating taxes for this project, and the marginal corporate tax rate is 32 percent. If the appropriate discount rate is 12 percent, what is the NPV of this project?
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Answer #1

Net Present Value = Present Value of Cash Inflow - Present Value of Cash Outflow

If Net Present Value is positive, we should accept the project and if it is negative, we should reject the project.

Please find screenshot of excel files attached below for your kind reference.

- Home InsertPage LayoutFormulas DataReview View DeveloperNitro Pro8 Cut 圏Autosumbr A General в 1 u .田, 彑, , 掴Merge & Center. % ,-28鼎Conditional Format- CellInsert Delete Format Conditional asome smes. Insert Delete Format ! Sort & Find & 2 ClearF Select Editing Format Painter Formatting as Table Styles Clipboard E23 NPV A. Initial Outflow Purchase of machine 1680000 B. Annual Cash Flow 414000 Savings in Labour Cost Less: Annual Operating Cost of Machine 56000 56000 134400 23600 71552 134400 286448 0.3220 92228.59 134400 134400 223600 71552 134400 286448 134400 223600 71552 134400 286448 0.4039 134400 Saving Before Tax Less: Tax @ 32% 223600 71552 134400 223600 223600 71552 134400 286448 0.3606 255757.14 228354.59203888.03182042.88162538.29145123.47 129574.53115691.54103296.02 223600 71552 134400 223600 71552 134400 286448 0.4523 Cash Flow After Tax PVF @ 12% PV of Cash Flow 134400 286448 0.8929 134400 286448 0.7118 134400 286448 0.6355 C. Terminal cash Flow Salvage Value PVF @ 12%. 10th Year of Salvage Value 108183.0075 NPV (A+B+C) 46678.09 14 ㅔ トト1 | Sheet1 , Sheet2 . Sheet3 | Sheet4

Formula View:

File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX Define Name ▼ calculate Now | e-use in Formula- 嚃Trace Dependents ◆Error Checking Insert Autosum Recently Financial Logical Text Date & Lookup & Math More Used Time Reference-aTrig, Functions-Manager Create from Selection . Remove Arrows Evaluate Formula window options Function Library Defined Names Formula Auditing Calculation B1 f Calculation of NPV A. Initial Outflow Purchas 1680000 B. Anual Cash Flow s in Labour Cost 414000 414000 414000 414000 14000 414000 Less: Annual Operating Cost of Machine 6000 6000 1680000.3 SUMET:E9 1630000-336000) 10 1680000-3 SUMIG -G10-o 32 Saving Before Tan Less: Tax 22 2% Add Cash Flow After Tat PVF @ 12% PV of Cash Flow SUMC7 --C10-0 32 134400 -SUMIC10:CI 10 SUA 23 -D10#0 32 134400 -SUMD10D1 HIoF0 134400 134400 134400 -SUMFI) -F13 F14 12 13 SUM G10.G12) -D12) D6 10El 10 F12 1/1.12 E E13 E14 36 1/1.12 H13 H1 C15 C14 -D13 D14 -G13 G14 15 16 17 18 19 C. Teminal cash Flow Value PVF @ 12%. 10th Year -L14 e Value (A+B+C) -C3+SUM(C15:L15)+C20 25 26 14 トト1 | Sheet1 . Sheet2 , Sheet3 | Sheet4 .. Р. Ready !File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX Define Name Cakculate Now ruse in Formula- E

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