Imagine you are the project manager at an investment firm and given the task of preparing a report (essay) addressing several companies' projects' evaluations. Use the supplied information for each project to answer the associated questions. Your deliverable is a professionally prepared MS Excel file, MS Word report (essay) applying APA 7 formatting and a quick information sheet. In your recommendation/conclusion of your report identify the best project to invest in and give reasons why. The quick information sheet is this document with the blanks filled out for each question area.

Harris Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given.

The firm pays 40 percent taxes on ordinary income and capital gains.

Project 2 Questions:

1) Calculate the book value of the existing asset being replaced.

2) Calculate the tax effect from the sale of the existing asset.

3) Calculate the initial investment required for the new asset.

4) Calculate the incremental earnings before depreciation and taxes for 5 years.

5) Calculate the incremental depreciation for six years.

6) Summarize the incremental after-tax cash flow (relevant cash flows) for years t = 0 through t = 6.

7) With the given information, compute the payback period.

8) ) With the given information in and 15 percent cost of capital,

(a) Compute the net present value.

(b) Should the project be accepted?

Facts
Existing Machine
Cost = $100,000
Purchased 2 years ago
Proposed Machine
Cost = $150,000
Installation = $20,000
Depreciation-the MACRS
5-year recovery schedule will be used
Depreciation using MACRS over
a 5-year recover schedule
Current market value = $105,000
Five year usable life remaining
Five year usable life expected

Earnings before Depreciation and Taxes
Proposed Machine
$170,000
Existing Machine
Year
1
$160,000
Year
1
150,000
170,000
3
140,000
3
170,000
4
140,000
4
170,000
5
140,000
5
170,000

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