Calculate the npv of investment

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Reference no: EM133120478

Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30%. The machine's base price is $650,000. For simplicity, we assume that no additional working capital is required during the machine's economic life. The firm's production department anticipates the machine will generate an additional $450,000 per year in annual operating revenue, while the associated annual operating expenses are projected to be $325,000 per year. Management estimates that at the end of 5 years, the machine can be sold for $120,000. Assume the asset class remains open after the machine is sold, and the firm's cost of capital is 12%. The firm's tax rate is 45%.

Calculate the NPV of this investment.

If the asset class is closed after the machine is sold at the end of 5 years, how will your answer in part 2) change? Why?

Reference no: EM133120478

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