Evaluating proposed acquisition of new equipment

Assignment Help Financial Management

Reference no: EM131905673

Pierre Imports is evaluating the proposed acquisition of new equipment at a cost of $900,000. In addition the equipment would require modifications at a cost of $50,000 plus shipping costs of $10,000. The equipment falls into the MACRS 3-year class, and will be sold after 3 years for $100,000. The equipment would require increased net working capital of 60,000. The equipment is expected to save the company $70,000 per year in before-tax operating costs. The company's marginal tax rate is 35 % and its cost of capital is 11%.

a. What is the cash outflow at Time 0?

b. Calculate net operating cash flows in years 1, 2, and 3?? (MACRS 3 year class: 0.3333, 0.4445, 0.1481, 0.0741)

b. Calculate net operating cash flows in years 1, 2, and 3?

Reference no: EM131905673

Questions Cloud

About short term volatility in revenues : A gold mining rm is concerned about short term volatility in its revenues. Gold currently sells for $650 an ounce, but the price is extremely volatile

Debt–equity ratio for company based on market values : The company also has 2.7 million shares that sell for $24 per share. What is the debt–equity ratio for this company based on market values?

What is average cash flow you will receive from mine : What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined?

Company uses straight voting : How much will it cost you to be certain that you can be elected if the company uses straight voting?

Evaluating proposed acquisition of new equipment : Pierre Imports is evaluating the proposed acquisition of new equipment at a cost of $900,000.

What is degree of operating leverage of modern artifacts : What is the degree of operating leverage of Modern Artifacts when sales are $1,620? Why is operating leverage different at these two levels of sales?

What are the project NPV and IRR : What are the project’s NPV and IRR? Should this project be undertaken if environmental impacts were not a consideration?

Calculate expected NPV : Calculate the expected NPV. Would you build the plant?

What is accounting break-even level of sales : What is the accounting break-even level of sales if the firm pays no taxes? What is the NPV break-even level of sales if the firm pays no taxes?

User Account

All Pages