Straightforward Capital Budgeting with Taxes (Non-MACRS-Based Depreciation); SensitivityAnalysis Dorothy & George Company is planning to acquire a new machine at a total cost of $30,600.The machine’s estimated life is 6 years and its estimated salvage value is $600. The company estimatesthat annual cash savings from using this machine will be $8,000. The company’s after-tax cost of capitalis 8%, and its income tax rate is 40%. The company uses straight-line depreciation (non-MACRS-based).Required1. What is this investment’s net after-tax annual cash inflow, rounded to nearest whole dollar?2. Assume that the net after-tax annual cash inflow of this investment is $5,000; what is the paybackperiod in years, rounded to 2 decimal places (e.g., 4.418 years = 4.42 years)?3. Assume that the net after-tax annual cash inflow of this investment is $5,000; what is the net present value(NPV) of this investment? Use the built-in NPV function; round your final answer to nearest whole dollar. 4. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable(i.e., the dollar cost savings that would yield an NPV of $0)? The present value factor for 8%, 6 years(Appendix C, Table 1) is 0.630; the present value annuity factor for 8%, 6 years (Appendix C, Table 2)is 4.623. Round final answer to the nearest whole dollar.
Straightforward Capital Budgeting with Taxes (Non-MACRS-Based
Analysis Dorothy & George Company is planning to acquire a new machine at a total cost of $30,600.
The machine’s estimated life is 6 years and its estimated salvage value is $600. The company estimates
that annual cash savings from using this machine will be $8,000. The company’s after-tax cost of capital
is 8%, and its income tax rate is 40%. The company uses straight-line depreciation (non-MACRS-based).
Required
1. What is this investment’s net after-tax annual
2. Assume that the net after-tax annual cash inflow of this investment is $5,000; what is the payback
period in years, rounded to 2 decimal places (e.g., 4.418 years = 4.42 years)?
3. Assume that the net after-tax annual cash inflow of this investment is $5,000; what is the
(NPV) of this investment? Use the built-in NPV function; round your final answer to nearest whole dollar.
4. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable
(i.e., the dollar cost savings that would yield an NPV of $0)? The present value factor for 8%, 6 years
(Appendix C, Table 1) is 0.630; the present value
is 4.623. Round final answer to the nearest whole dollar.
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The NPV answer is incorrect. Can you please check and redo?
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