Holmes Manufacturing is considering a new machine that costs $275,000 and would reduce pretax manufacturing costs by $90,000 annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $22,000 at the end of its 5-year operating life. Net operating working capital would increase by $26,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 25%, and a 12% WACC is appropriate for the project. a. Calculate the project's NPV. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ 35188. O Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places. 17.54 O % Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places. 15.21 O % Calculate the project's payback. Do not round intermediate calculations. Round your answer to two decimal places. 7.41 8 years

Holmes Manufacturing is considering a new machine that costs $275,000 and would reduce pretax manufacturing costs by $90,000 annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $22,000 at the end of its 5-year operating life. Net operating working capital would increase by $26,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 25%, and a 12% WACC is appropriate for the project. a. Calculate the project's NPV. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ 35188. O Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places. 17.54 O % Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places. 15.21 O % Calculate the project's payback. Do not round intermediate calculations. Round your answer to two decimal places. 7.41 8 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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