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The following facts are presented on an opportunity to invest in Machine A: Cost of equipment is $200,000. The machine has an expected 4-year useful life; it will be depreciated according to the 3-year Modified Accelerated Cost Recovery System (MACRS). The estimated salvage value at the end of 4 years would be $20,000. The additional investment in working capital required would be $18,000. The applicable tax rate is 30 percent. The operating profits (excluding depreciation expenses) are estimated to be $80,000 per year for 4 years. The applicable cost of capital is 10 percent.
(a) Please calculate the NPV and IRR of the project.
(b) If the cost of new machine has increased to $235,000, what are the NPV and IRR of the project?
Company purchase a window franchise from on January 2, 2010 for $100,000. A research company estimated that the remaining useful life of the franchise was fifty years.
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a manufacturer of interocular lenses is qualifying a new grinding machine and will qualify the machine if the
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