Incremental cash flows for each year of the machine life

Assignment Help Financial Management

Reference no: EM132021010

A company is evaluating the purchase of a machine to improve product quality and output levels. The new machine would cost $1.4 million and would be depreciated for tax purposes using the straight-line method over an estimated seven-year life to its expected salvage value of $100,000. The new machine would require an addition of $90,000 to working capital at the beginning of the project, which will of course be returned to the firm at the end of the project. In each year of the machine's life, the machine would increase the company's pre-tax cash receipts by $320,000. The company has a 9% cost of capital and is in the 35% marginal tax bracket.

Part 1: Prepare a Cash Flow Spreadsheet that identifies the incremental cash flows for each year of the machine's life.

Part 2: Calculate the investment's net present value (NPV).

Part 3: Calculate the investment's internal rate of return (IRR).

Reference no: EM132021010

Questions Cloud

Company and motivating for the employee : What measures can an employer take to design a customer service job to make it both efficient for the company and motivating for the employee?

What is the maximum number of restaurants : What is the maximum number of restaurants that Carni can establish for his company?

Describe your research process and share the content : Describe your research process and share the content of the articles while demonstrating your writing and information literacy skills.

Mnc company headquartered in australia : As a Melbourne-based HR Manager for a MNC company headquartered in Australia, The organisation is in the process of diversifying and opening up

Incremental cash flows for each year of the machine life : Prepare a Cash Flow Spreadsheet that identifies the incremental cash flows for each year of the machine's life.

Four steps in the control process : How can individual farmers use the four steps in the control process to take advantage of information gathered by weather-prediction technology?

Financial performance perspective : From a financial performance perspective, what measures can farmers use to determine if weather-prediction technology should be part of their overall business

Consistent with the values : Attack or defend the notion that any organization that claims to be above average must carefully ensure that newcomers are successfully

How the research is related to your selected theory : Note how the research is related to your selected theory for the final project. How relevant is the research? How does the research compare to or contrast.

User Account

All Pages