Require any modification or increase in net working capital

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You have been hired as a financial consultant by ABC Corporation. ABC is considering investing in a new machine to produce dog biscuits. ABC has provided you with the following information: Full price of machine is $95,000. The machine will not require any modification or increase in net working capital. ABC has a 30% marginal tax rate. The machine falls into the MACRS 3-year class. ABC will use the machine for 4 years and then plans to sell it for $9,000 at the end of year 4. The machine is expected to increase earnings before depreciation by $31,000 a year for the life of the machine. ABC has a WACC of 12%. You have been hired by ABC to create a spreadsheet that can be used by the ABC managers to assist them in making the investment decision and will calculate the NPV of the project. The spreadsheet should be set up to allow for sensitivity analysis to be conducted. The cells to input the full price, tax rate, increased earnings, sale price in year 4, and WACC should be easily identified and allow the ABC managers to change their values.

Reference no: EM13803333

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