Compute the npv and irr for both machines

Assignment Help Financial Accounting

Reference no: EM133345024

Question: You are evaluating two different machines. The Piton I costs $450,000, has a five-year life that will be depreciated down to zero using the straight-line method. The machine is expected to save the company $125,000 in operating costs (pre-tax) each year it is in operation. Assume the machine can be sold for $25,000 at the end of its useful life. The Piton II costs $350,000, has a seven-year life that will be depreciated down to zero using straight-line method. Piton II will only save the company $75,000 per year (before taxes) but will have a salvage value of $35,000 at the end of its life.

If your tax rate is 23 percent and your discount rate is 9 percent, compute the NPV and IRR for both machines. Which do you prefer?
If Piton 1 required an immediate investment of $25,000 of working capital, would your answer change?

Reference no: EM133345024

Questions Cloud

What actions maximize their value since there : privately-held companies, family-owned businesses, non-profit organizations)? What actions maximize their value since there is either no stock or the stock

Design from a theoretical perspective : This company has reached out to you to suggest three elements of facility design that makes a plant "friendlier" to work in (and would make the work more

Find a current news source that centers : Find a current news source that centers on the current international business strategies of the American auto industry in Mexico and Canada. You may also look

Summary of an analysis - article southwest airlines in 2020 : summary of an analysis, which is described in full in the appendices. Begin with your understanding of the situation in a problem statement

Compute the npv and irr for both machines : If your tax rate is 23 percent and your discount rate is 9 percent, compute the NPV and IRR for both machines. Which do you prefer? If Piton 1 required

Provide a detailed example of how your organisation : Provide a detailed example of how your organisation could use the concept to improve how it achieves its target/objectives (Give specific, practical real-world

Provide an example, either within your work environment : Provide an example, either within your work environment or in society at large, of when changing demographics or emerging technologies had an impact on the orga

Is independence impaired for kpmg : Is independence impaired for KPMG? Identify any "safeguards" that can be taken by KPMG to allow it to continue audit work for MI. How will the safeguards

What is the homeownership rate in massachusetts : what is the homeownership rate in Massachusetts, Connecticut and Rhode Island and why is the important for a heating, and air conditioning company?

User Account

All Pages