Determine the projects initial outlay

Assignment Help Financial Accounting

Reference no: EM1312373

Compute project initial,NPV and cash flow

Interco Machinery, Inc. is evaluating the acquistion of a new production machine.This machine will cost $200,000, delivered, and will result in an annual increase in earnings before interest and tax of $50,000.This machine has a expected life of 10 years with no salvage value.Depreciation is assumed to be straight-line 10 years.To be operated properly this machine will require an after tax expenditure of $5,000 to install and another $5,000 after tax for an operator training session.Due to it efficiency, this machine will also require an increase of $20,000 in inventory.Company projects of this rish class require a rate of return of 10%.The companys marginal tax rate is 34%, and the expenditure will require the borrowing of $100,000 from the bank at 8% interest rate - resulting in additional interest payments of $8,000 per year.

1. What is the projects initial outlay?
2. What are the projects annual after tax cash flows for years 1-9?
3. What is the projects terminal cash flow in year 10 (terminal + regular)?
4. What is the projects NPV?
5. Should the project be accepted? Why or Why Not?

Reference no: EM1312373

Questions Cloud

Estimating median and first and third quartiles : Then use ogive to estimate median and first and third quartiles. Also utilize it to reply following question: What percent of 60 mutual fund loads are less than 75.

Determine the inventory balance at december : Determine the inventory balance at December 31, 2004 and evaluate the inventory balance at Decmber 31, 2004, without the reduction for LIFO reserve?

Calculate the focal length of the magnifying glass : Rare 1918 "Jenny" stamp, depicting a misprinted, upside-down Curtiss JN-4 "Jenny" airplane, was sold at auction for $525,000. A collector uses a simple magnifiying glass to examine the "Jenny," obtaining a linear magnification of 2.4 when the stam..

Compute the return on the investment : Compute the return on the investment and What is the rate of return that Pedro is being promised

Determine the projects initial outlay : Determine the projects initial outlay and are the projects annual after tax cash flows for years 1-9?

Estimate marginal and conditional probabilities : What is the probability that a cereal would both high calorie and high fiber? In other words, what is P (high calorie and high fiber)?

Defining the lower and upper limits of interval : What proportion of time will it take clean-up crew 56 or more hours for cleaning plant? Define the lower and upper limits of interval.

Determining if peanut butter is carcinogenic : Explain the experiments, their expected results, and your conclusions. You may suppose that you have an unlimited budget and an Institutional Review Board with very strict guidelines for research in humans.

Compute the quantity demand by each consumer : Karen earns $75,000 in the current period and will earn $75,000 in the future. Assuming that these are the only two periods, and that banks in her country borrow and lend at an interest rate r = 0, draw her inter-temporal budget constraint.

User Account

All Pages