A company is considering an investment (at time = 0) in a machine that produces largeplastic boxes. The cost of the machine is 46,609 dollars with zero expected salvagevalue. Annual production in units during the 3-year life of the machine is expected to be(starting at time = 1) 4,554, 8,381, and 12,616. The sale price per unit of the plasticboxes is 11 dollars in year one, and then expected to increase by 9% per year.Production costs per unit will be 6 dollars in year one, and then expected to increase by3% per year. Depreciation on the machine is 11,182 dollars per year, the tax rate is 40%and the minimum acceptable rate of return is 7% percent. Calculate the net presentvalue of this investment. Assume all flows are at the end of each year. (note: round youranswer to the nearest cent, and do not include spaces, currency signs, plus or minussigns, or commas)

The net present value is used to contrast the present value of cash inflows to outflows in order to…

Answered: and the minimum acceptable rate of…

and the minimum acceptable rate of return is 7% percent. Calculate the net present value of this investment. Assume all flows are at the end of each year. (note: round your

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

A company is considering an investment (at time = 0) in a machine that produces large
plastic boxes. The cost of the machine is 46,609 dollars with zero expected salvage
value. Annual production in units during the 3-year life of the machine is expected to be
(starting at time = 1) 4,554, 8,381, and 12,616. The sale price per unit of the plastic
boxes is 11 dollars in year one, and then expected to increase by 9% per year.
Production costs per unit will be 6 dollars in year one, and then expected to increase by
3% per year. Depreciation on the machine is 11,182 dollars per year, the tax rate is 40%
and the minimum acceptable rate of return is 7% percent. Calculate the net present
value of this investment. Assume all flows are at the end of each year. (note: round your
answer to the nearest cent, and do not include spaces, currency signs, plus or minus
signs, or commas)

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