The purchase of a new 400-ton stamping press

Reference no: EM13674811

1) McConachie Company is considering the purchase of a new 400-ton stamping press. The press costs $360,000, and an additional $40,000 is needed to install it. The press will be depreciated straight-line to zero over a five-year life. The press will generate no additional revenues, but it will reduce cash operating expenses by $140,000 annually. The press will be sold for $120,000 after five years. An inventory investment of $60,000 is required during the life of the investment. McConachie is in the 40 percent tax bracket. The required return is 10%.

What is CF5?
a.

154,000
b.

116,000
c.

248,000
d.

132,000

2) McConachie Company is considering the purchase of a new 400-ton stamping press. The press costs $360,000, and an additional $40,000 is needed to install it. The press will be depreciated straight-line to zero over a five-year life. The press will generate no additional revenues, but it will reduce cash operating expenses by $140,000 annually. The press will be sold for $120,000 after five years. An inventory investment of $60,000 is required during the life of the investment. McConachie is in the 40 percent tax bracket. The required return is 10%.

What is the NPV of the project?
a.

-74,256
b.

42,185
c.

-15,365
d.

61,693

Reference no: EM13674811

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