Calculate the net cash flows for the year

Assignment Help Business Economics

Reference no: EM13214878

Smith Corp is considering purchasing a new machine, which costs $150,000, has an estimated useful life of 6 years, and will have a salvage value of $20,000 at the end of year 6. This machine falls into the MACRS 5-year class, and under current law, the annual depreciation factors are: .20, .32, .19, .12, .11, and .06. The installation cost for this machine would amount to $35,000 which has to be capitalized along with the cost of the machine. Investment in additional working capital would amount to $25,000 but this would be realized in full at the end of year 6.

This new machine which replace an old machine with a current market value of $10,000.

New sales attributably to the new machine would amount to $75,000 per year. Operating expenses, excluding depreciation, would amount to $20,000 per year.

Smith's marginal tax rate is 30%, and cost of capital is 12%.

Calculate the net cash flows for the year 0 and the years 1 thru 6. What is the NPV of the project? What is the modified internal rate of return for this project?

Reference no: EM13214878

Questions Cloud

What is national saving : Suppose household saving is $20, the government spending deficit is $4, and investment is $20.

How much total utily was derived from eating three pieces : assuming that the marginal utility of the first four pieces of candy was 30, 28, 24, and 18 respectively, how much total utily was derived from eating three pieces of candy?

What is the firm weighted average cost of capital : The U.S. Treasury bill is yielding 2.6% and the return on the market is 11.2%. The corporate tax rate is 30%. What is the firm's weighted average cost of capital?

Compute the net present value : Calculate the Net Present Value (NPV), the Modified Internal Rate of Return (MIRR), the Profitability Index and the Discounted Payback for this project. Should the project be accepted? Why or why not?

Calculate the net cash flows for the year : Calculate the net cash flows for the year 0 and the years 1 thru 6. What is the NPV of the project? What is the modified internal rate of return for this project?

How much the quantity of a good traded changes after a shift : How much the quantity of a good traded changes after a shift of the supply curve depends on the size of the shift.

Patient protection and affordable care act : Assuming the other two branches wanted to check the actions of the department under examination, how might they go about doing so? This question focuses on Patient Protection and Affordable Care Act.

Identify two reasons for differences in accounting systems : Christopher Nobes suggests that there are several reasons for the differences in accounting systems throughout the world. Read the article and write a two page report on the following: (1) Identify two reasons for differences in accounting systems ..

Describe what major factors should the company be aware : What major factors should the company be aware of as it evaluates possible investment projects in the future? Would you be interested in investing in this company? Why or why not? Are there additional factors that aren't a part of this case that you..

User Account

All Pages