Assume that the company’s discount rate is 14%. Calculate the NPV of this project. Would you recommend that Bart and Millhouse add this machine to their factory?
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1)Bart and Millhouse own a small factory that manufactures rubber snakes used to scare away birds from houses, gardens and playgrounds. A recent and unexplained increase in the bird population in Springfield has significantly increased the demand for rubber snakes. To take advantage of this opportunity, Bart and Millhouse plan to add a new molding machine that will double the output of their existing facility. The cost of the new machine is $20,000. With this purchase, current assets must increase by $5,000 and current liabilities will increase by $3,000. The economic life of the machine is 4 years, and it falls under the MACRS three year
Bart and Millhouse anticipate recouping 100% of the additional investment in net
Assume that the company’s discount rate is 14%. Calculate the
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