Find net cost of machine for capital budgeting purposes

Reference no: EM1357841

You must evaluate a proposal to buy a new milling machine. The base price is $108,00, and shipping and installation costs would be another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 year for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent. The machine would require a $5,500 increase in working capital. There would be no effect on revenues, but pre-tax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent %5,000 last year investigating the feasibility of using the machine.

What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?

Reference no: EM1357841

Questions Cloud

Show the wand project : Prepare a project plan outline for the Wand project using the 9 knowledge areas of the PMI PMBOK

Gross profit method to determine inventory lost : Lisa's School Supplies suffered a fire loss. The company needs to estimate the cost of the goods destroyed. Beginning inventory was $500,000, purchases totaled $700,000, and sales came equaled $1,000,000.

Explain how is the federal budget deficit affecting the us : Explain how is the federal budget deficit affecting the U.S. economy. Essay should be about 400 words. How dependent is American, on the Chinese economy.

Create the users for the sales organization unit : Explain how you would create the users for the sales organization unit and how you can set up work groups in this particular situation

Find net cost of machine for capital budgeting purposes : You must assess a proposal to buy a new milling equipment. The base price is $108,00, and shipping and installation costs would be another $12,500.

Calculate the magnitude of the planes acceleration : Calculate the magnitude of the planes acceleration. On a level road with its brakes on, a car traveling at 93 km/hr stops within 87 m when the brakes lock and the car slides.

Working with straight line depreciation : Leah, Inc. has machinery with a cost of $100,000. The machinery has an estimated useful life of 10 years, and an estimated salvage value of $10,000. The machinery is expected to be able to produce a total of 1,000,000 units during its estimated li..

What is the total annual shipping cost : Which alternative would you recommend, and why and what is the total annual shipping cost

Illustrate about the maximum amount that the money supply : Suppose that excess reserves in the Stranda National Bank are $15,000 and the reserve requirement is 4 percent. Illustrate about the maximum amount that the money supply can be increased is.

User Account

All Pages