Find what firm net initial investment for the new machine

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Johnson Products is considering purchasing a new milling machine that costs $1,000,000. The machine's installation and shipping costs will total $25,000. If accepted, the milling machine project will require an initial net working capital investment of $200,000.

Problem a. What is the firm's net initial investment (NINV) for the new machine?

Problem b. If Johnson Products plans to depreciate the machine on a straight-line method for 8 years, what will be its depreciation?

Problem c. The new machine is expected to earn for Johnson Products $350,000 per year (revenues-expense) for 8 years before depreciation and taxes. If the machine is depreciated on a straight-line basis for the 8-year period with no salvage value, and the tax rate is 40% what is the annual net cash flow?

Problem d. What is the terminal cash flow if the new machine has a salvage value of $100,000.

Reference no: EM132714089

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