You must evaluate a proposal to buy a new milling machine. The base price is $136,000, and shipping and installation costs would add another $10,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $68,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $10,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $59,000 per year. The marginal tax rate is 35%, and the WACC is 13%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What is the initial investment outlay for the machine for
capital budgeting purposes, that is, what is the Year 0 project
cash flow? Round your answer to the nearest cent.
$
What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations.
Year 1 $
Year 2 $
Year 3 $
You must evaluate a proposal to buy a new milling machine. The base price is $136,000,...
You must evaluate a proposal to buy a new milling machine. The base price is $199,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $129,350. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $10,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax...
You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $117,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $79,000. The machine would require a $5,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $35,000...
You must evaluate a proposal to buy a new milling machine. The base price is $199,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $129,350. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $10,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax...
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You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $199,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $77,000. The machine would require a $6,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $32,000...
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You must evaluate a proposal to buy a new milling machine. The base price is $128,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $70,400. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $4,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax...
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and instaliation costs would add another $14,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for S 5400. The applicable de require a $ ® $6,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no affect on revenues, but pretax labor would decline by $37,000 per year....