A new operations system requires an initial investment of $100,000 and will generate $70,000 in revenue in year 1. The system will incur $50,000 in general expenses from the first year. The asset is classified as a 5-year MACRS property for depreciation purposes. The expected salvage value is $8,000 at the end of the project life. The firm pays taxes at a rate of 20% and has a MARR of 15%. The project has a 6-year life. Revenue will increase at 10% each year and expenses will increase at 7% each year. A loan is to be taken out for 5% of the initial investment amount. The loan will be repaid over the project life in equal payments, at an interest rate of 8%. Calculate the following: a. Determine the allowed depreciation amounts b. Calculate the repayment schedule of the loan c. Calculate the Gains (Losses) associated with Asset Disposal d. Create the Income Statement e. Develop a Cash Flow Statement f. Is this project justifiable at a MARR of 15%? • Calculate the NPV • Calculate IRR
A new operations system requires an initial investment of $100,000 and will generate $70,000 in revenue in year 1. The system will incur $50,000 in general expenses from the first year. The asset is classified as a 5-year MACRS property for
Calculate the following:
a. Determine the allowed depreciation amounts
b. Calculate the repayment schedule of the loan
c. Calculate the Gains (Losses) associated with Asset Disposal
d. Create the Income Statement
e. Develop a Cash Flow Statement
f. Is this project justifiable at a MARR of 15%?
• Calculate the
• Calculate
• State your conclusions.
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