Hoover printing is considering buying a binding machine to

Reference no: EM13603023

Hoover printing is considering buying a binding machine to supplement their printing business. The cost of the machine with delivery and installation is $5,500 and it is expected to last for 5 years with no salvage value. Supplies inventory would be expected to increase by $2,000 and the annual gross revenue from the addition of that service is projected to be $3,000 with annual costs projected to $1,700. Assuming a straight-line depreciation, a tax rate of 31%, and a cost of capital of 12%, is the project worth doing? Produce a schedule of the cash flows through the 5-year term of the project. Using the scenario above in number 3, Hoover Printing is estimating an annual inflation of 6% on costs with the potential of only being able to increase the retail of the service by only 4%. Produce a schedule of the impact of inflation by year and make another recommendation with inflation factored in.

Reference no: EM13603023

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