You need to evaluate the purchase of a new molding machine. The equipment's basic price is $84,572, and it would cost another $9,397 to modify it for special use by your firm. The molding machine, which falls into the MACRS 3-year class, would be sold after 3 years for $33,829. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,973. The machine would have no effect on revenues, but it is expected to save the firm $36, 565 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 21.0% and its cost of capital is 14.0 %. How much is the year 2 NOPAT for this project? ($5,234) ($5,663) ($4,111) ($3,477) (S5,057)
You need to evaluate the purchase of a new molding machine. The equipment's basic price is $84,572, and it would cost another $9,397 to modify it for special use by your firm. The molding machine, which falls into the MACRS 3-year class, would be sold after 3 years for $33,829. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,973. The machine would have no effect on revenues, but it is expected to save the firm $36, 565 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 21.0% and its cost of capital is 14.0 %. How much is the year 2 NOPAT for this project? ($5,234) ($5,663) ($4,111) ($3,477) (S5,057)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You need to evaluate the purchase of a new molding machine. The equipment's basic price is $84,572, and it would
cost another $9,397 to modify it for special use by your firm. The molding machine, which falls into the MACRS 3-year
class, would be sold after 3 years for $33,829. The MACRS rates for the first three years are 0.3333, 0.4445, and
0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,973. The
machine would have no effect on revenues, but it is expected to save the firm $36, 565 per year in before-tax
operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 21.0% and its cost of capital is 14.0 %.
How much is the year 2 NOPAT for this project?
($5,234)
($5,663)
($4,111)
($3,477)
(S5,057)
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