What are the operating cash flows in year in years

Assignment Help Financial Management

Reference no: EM131583408

You have been asked by the management of your company to evaluate the proposed acquisition of a new machine. The machine’s basic price is $50,000, and it will cost another $10,000 to modify it for the special use by your company. The machine falls into the MACRS 3-year class property (the MACRS percentage allowances are 0.33, 0.45, 0.15, and 0.07 in years 1,2,3, and 4 respectively). The project will require an increase in net working capital of $2,000 and it will last for three years at the end of which the machine can be scrapped for $20,000. The purchase of this machine will have no effect on revenues, but the management expects to have labor cost savings of $20,000 per year. The marginal tax rate of your company is 40 percent.

What is the amount of initial cash flow in year 0, i.e., the initial investment, if your company requires the new machine?

What are the operating cash flows in year in years 1,2, and 3?

If the project’s cost of capital is 10 percent, should you recommend the project?

Reference no: EM131583408

Questions Cloud

Company free cash flow to equity holders is closest : The company's free cash flow to equity holders is closest to:

Explain the two components of the risk free rate of return : How is it possible that we can talk about risk without standard deviation information for companies? explain the two components of the risk free rate of return.

Calculate the projects NPV and standard deviation : Calculate the projects NPV, standard deviation, and coefficient variation.

Considered a primary market transaction : Which of the following would be considered a primary market transaction:

What are the operating cash flows in year in years : What is the amount of initial cash flow in year 0, What are the operating cash flows in year in years 1,2, and 3?

Ergofurn uses a job order costing system : ErgoFurn, Inc. manufactures ergonomically designed computer furniture. ErgoFurn uses a job order costing system.

Zero coupon bond maturity : ?A zero coupon bond maturity in 20 years for RM1000 and currently selling for RM214.

Valuation fundamentals-personal finance problem : Imagine that you are trying to evaluate the economics of purchasing an automobile. What is the maximum price you would be willing to pay to acquire the? car?

What is? rogot effective after-tax : What is? Rogot's (effective after-tax) WACC? What is? Rogot's pretax WACC?

User Account

All Pages