Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,400.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net working capital (inventory) of $870.00. The new machine would not change revenues, but it is expected to save the firm $31,775.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 35.00%. If the project's cost of capital is 12.50%, what is the NPV of the project? Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. Group of answer choices $40,993.57 $10,000.00 $38,124.02 $12,400.00 $22,582.88
Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,400.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net working capital (inventory) of $870.00. The new machine would not change revenues, but it is expected to save the firm $31,775.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 35.00%. If the project's cost of capital is 12.50%, what is the NPV of the project? Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. Group of answer choices $40,993.57 $10,000.00 $38,124.02 $12,400.00 $22,582.88
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1lM
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Cash flows estimation and capital budgeting:
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,400.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRSdepreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net working capital (inventory) of $870.00. The new machine would not change revenues, but it is expected to save the firm $31,775.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 35.00%.
If the project's cost of capital is 12.50%, what is the NPV of the project?
Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,400.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS
If the project's cost of capital is 12.50%, what is the NPV of the project?
Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.
Group of answer choices
$40,993.57
$10,000.00
$38,124.02
$12,400.00
$22,582.88
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VIEWStep 2: Computation of present value of savings in operating costs.
VIEWStep 3: Computation of Present value of tax savings on depreciation and balance value at the end of year 3.
VIEWStep 4: Computation of present value of net proceeds on sale
VIEWStep 5: Computation of Present value of recovery of Working capital at the end of year 3.
VIEWStep 6: Computation of Net present value.
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