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Calculating project cash flows and? npv

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(Calculating project cash flows and? NPV) Raymobile Motors is considering the purchase of a new production machine for $ 550,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $ 100,000 per year. To operate this machine? properly, workers would have to go through a brief training session that would cost $ $26,000 after tax. In? addition, it would cost ?$ 6,000 after tax to install this machine correctly. ? Also, because this machine is extremely? efficient, its purchase would necessitate an increase in inventory of ?$ 24,000. This machine has an expected life of 10 ?years, after which it will have no salvage value. Assume simplified? straight-line depreciation, that this machine is being depreciated down to? zero, a 30 percent marginal tax? rate, and a required rate of return of 12 percent.

a. What is the initial outlay associated with this? project?

b. What are the annual? after-tax cash flows associated with this project for years 1 through 9??

c. What is the terminal cash flow in year 10 ?(that is, the annual? after-tax cash flow in year 10 plus any additional cash flows associated with termination of the? project)?

d. Should this machine be? purchased?

Reference no: EM132284792

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