A manufacturing company is considering the acquisition of a new injection-molding machine at a cost of $110,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $8,000. The addition of this machine to the current production facility is expected to generate annual revenue of $60,000. The firm has only $70,000 available from its equity funds. so it must borrow the additional $40,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 40%. Assume that the asset qualifies for a seven-year MACRS property classification.(a) Determine the after-tax cash flows.(b) Determine the NPW of this project at MARR= 14%

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A manufacturing company is considering the acquisition of a new injection-molding machine at a cost of $110,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $8,000. The addition of this machine to the current production facility is expected to generate annual revenue of $60,000. The firm has only $70,000 available from its equity funds. so it must borrow the additional $40,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 40%. Assume that the asset qualifies for a seven-year MACRS property classification.
(a) Determine the after-tax cash flows.
(b) Determine the NPW of this project at MARR= 14%

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