1. Johnson Products is considering purchasing a new milling machine that costs $100,000. The machine's installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Johnson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Johnson's marginal tax rate is 40 percent. a. Calculate the project's net investment (NINV) b. Calculate the annual straight-line depreciation for the project.
1. Johnson Products is considering purchasing a new milling machine that costs $100,000. The machine's installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Johnson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Johnson's marginal tax rate is 40 percent. a. Calculate the project's net investment (NINV) b. Calculate the annual straight-line depreciation for the project.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![1. Johnson Products is considering purchasing a new milling machine
that costs $100,000. The machine's installation and shipping costs will
total $2,500. If accepted, the milling machine project will require an initial
net working capital investment of $20,000. Johnson plans to depreciate
the machine on a straight-line basis over a period of 8 years about a
year ago, Johnson paid $10,000 to a consulting firm to conduct a
feasibility study of the new milling machine. Johnson's marginal tax rate
is 40 percent.
a. Calculate the project's net investment (NINV)
b. Calculate the annual straight-line depreciation for the project.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7c381f4c-4c67-49eb-b7d0-5c94ed7f3464%2Fa947f3eb-f158-440b-b665-5d3903299370%2F6fq6rle_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Johnson Products is considering purchasing a new milling machine
that costs $100,000. The machine's installation and shipping costs will
total $2,500. If accepted, the milling machine project will require an initial
net working capital investment of $20,000. Johnson plans to depreciate
the machine on a straight-line basis over a period of 8 years about a
year ago, Johnson paid $10,000 to a consulting firm to conduct a
feasibility study of the new milling machine. Johnson's marginal tax rate
is 40 percent.
a. Calculate the project's net investment (NINV)
b. Calculate the annual straight-line depreciation for the project.
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