You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,140.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $1,750.00. The machine would require an increase in net working capital (inventory) of $810.00. The new machine would not change revenues, but it is expected to save the firm $33,605.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 34.00%. If the project's cost of capital is 15.90%, what is the NPV of the project? $10,000.00 $41,348.12 $51,685.16 $12,140.00 $24,014.02
Cash flows estimation and capital budgeting:
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,140.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS
If the project's cost of capital is 15.90%, what is the NPV of the project?
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