Should the machine be purchased

Reference no: EM13273870

Tito's printing purchases a ew machine for $250,000.This will produce increased earnings before tax of $50,000.Training for workers would be $6000 after taxes.Installation is $7,000. Inventory would increase by $10,000. The machine's expected life is 10 years with no salvage value.The firm borrowed $100,000 at 11 pecent per year resulting in additional interest of $11,000 per year.Assuming straight line depreciation and a marginal tax of 36 percent and a required rate of return of 15 percent.

What is the initial outlay for the project?
What are the after tax for years 1-through 9
What is the terminal cash flow in year 10.
Should the machine be purchased?

Reference no: EM13273870

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