Reference no: EM131180631
A Plastic company, Inc., Plastic grading company and Plastic extraction, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given as of today. Table one: Facts Existing Machine proposed machine costs 115,000.00 165000.00 installation 10,000 20,000 MACRS 5 - years 5 - Years Market Value 105,000.00 Purchased 2 years ago. Table two: forecasted revenues year Existing Machine Proposed Machine year 1 160,000 170,000 2 year 150,000 170,000 3year 140,000 170,000 4 year 140,000 170,000 5 year 140,000 170,000 another table: Forecasted Expenses (No Depreciation) year Existing Machine Proposed Machine Year 1 104,000 110,500 2 year 104,000 110,500 3 year 104,000 110,500 4 year 104,000 110,500 5year 104,000 110,500 The firm pays 40 percent taxes on ordinary income and capital gains. A. Given the information in Table 1, compute the initial investment. B. Given the information in Table 2, compute the incremental annual cash flows. C. Given the information from Table 1, assuming 12% rate of return, what is Plastic Company’s Inc. NPV on the proposed machine.
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