Fred F. Stone wants to increase the production rate in the Pebble Tech manufacturing plant by adding a new machine. Calculate the NPV for the following capital budgeting proposal: $200,000 initial cost, to be depreciated straight-line over five years to an expected salvage value of $10,000. Resale value of the machine is expected to be $11,000. It has a 35% tax rate, $85,000 additional annual revenues, $33,000 additional annual expense, and $10,000 additional investment in working capital. What would be the projected cash flow for year 5? What would be the projected cash flow for year 0?

Fred F. Stone wants to increase the production rate in the Pebble Tech manufacturing plant by adding a new machine. Calculate the NPV for the following capital budgeting proposal: $200,000 initial cost, to be depreciated straight-line over five years to an expected salvage value of $10,000. Resale value of the machine is expected to be $11,000. It has a 35% tax rate, $85,000 additional annual revenues, $33,000 additional annual expense, and $10,000 additional investment in working capital. What would be the projected cash flow for year 5? What would be the projected cash flow for year 0?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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