Calculate the annual straight line depreciation for project

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Reference no: EM131338365

Johnson Products is considering purchasing a new milling machine that costs $100,000. The machine's installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of eight years.

About a year ago, Johnson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Johnson's marginal tax rate is 40 percent.

a. Calculate the project's net investment (NINV).

b. Calculate the annual straight-line depreciation for the project.

Reference no: EM131338365

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