A machine can be purchased for 10500 including

Reference no: EM13386363

A machine can be purchased for $10,500, including transportation charges, but installation costs will require $1,500 more. The machine is expected to last four years and produce annual cash revenues of $6,000. Annual cash operating expenses are expected to be $2,000, with depreciation of $3,000 per year. The firm has a 30 percent tax rate. Determine the relevant after-tax cash flows and prepare a cash flow schedule. Use the information given above, to do the following:
a. Calculate the payback period for the machine.
b. If the project’s cost of capital is 10 percent, would you recommend buying the machine?
c Estimate the IRR for the machine.

Reference no: EM13386363

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