What is the initial net cash flow of the machine

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Reference no: EM131087675

Mars, Inc. is considering the purchase of a new machine, which will reduce manufacturing costs by $5,000 annually. Mars will use the MACRS (5-year class) method to depreciate the machine, and it expects to sell the machine at the end of its 5-year life for $10,000 (Rates are 0.20, 0.32, 0.19, 0.12, 0.11, 0.06, respectively). The firm expects to be able to REDUCE NET WORKING CAPITAL by $15,000 when the machine is installed. Mars’ marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature. The machine’s net cost is $60,000. What is the book value of the machine at the end of Year 3? Hint: depreciation schedule needed.

What is the initial net cash flow of the machine (i.e. NCF at t = 0)?

a. -$60,000

b. -$45,000

c. -$75,000

d. None of the above

What is the final net cash flow at t = 5?

a. $5,640

b. $15,640

c. $13,080

d. -$1,920

e. None of the above

What is the NPV of the project?

What is the correct MIRR of the project?

a. 0%

b. –1.22%

c. –16.49%

d. 12%

e. None of the above

Reference no: EM131087675

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