Daily Enterprises is purchasing a $10.58 million machine. It will cost $74,461.00 to transport and install the machine. The machine has a depreciable life of five years using the straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.50 million per year along with incremental costs of $1.45 million per year. Daily's marginal tax rate is 37.00%. The cost of capital for the firm is 10.00%. (answer in dollars..so convert millions to dollars) The project will run for 5 years. What is the NPV of the project at the current cost of capital?

Daily Enterprises is purchasing a $10.58 million machine. It will cost $74,461.00 to transport and install the machine. The machine has a depreciable life of five years using the straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.50 million per year along with incremental costs of $1.45 million per year. Daily's marginal tax rate is 37.00%. The cost of capital for the firm is 10.00%. (answer in dollars..so convert millions to dollars) The project will run for 5 years. What is the NPV of the project at the current cost of capital?

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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A $63,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $91,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $7,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
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Daily Enterprises is purchasing a $10.4 million machine. It will cost $46,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.4 million per year along with incremental costs of $1.5 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? The free cash flow for year 0 will be $10,446,000. (Round to the nearest dollar.) The free cash flow for years 1-5 will be $ (Round to the nearest dollar.)
A $76,000 machine with a 10-year class life was purchased 3 years ago. The machine will now be sold for $31,000 and replaced with a new machine costing $51,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $ 16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS-10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN
Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $135,000 per year. Direct production costs are $45,000, and the fixed costs of maintaining the lawn mower factory are $17,500 a year. The factory originally cost $0.90 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%.
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A $69,000 machine with a 5-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $88,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $3,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
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