Calculate the project operating cash flows

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Reference no: EM131884243

The Nevada inc. is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Firm would use the 3-year MACRS to depreciate the machine, and management thinks the machine would have a salvage value of $33,000 at the end of its 5-year operating life. The MACRS depreciation rates are 33.33%, 44.45%, 14.81% and 7.42%. Net working capital would increase by $35,000 initially, but it would be recovered at the end of the project’s 5-year life. Firm’s tax rate is 40% and WACC is 10%.

a) Calculate the project’s operating cash flows (CF0, CF1,...).

b) Calculate the project’s NPV, IRR, MIRR, EAA, and PI.

Reference no: EM131884243

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