What is the initial outlay associated with this project

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(Calculating project cash flows and? NPV) Raymobile Motors is considering the purchase of a new production machine for$ 450000.The purchase of this machine will result in an increase in earnings before interest and taxes of$ 120000 per year. To operate this machine? properly, workers would have to go through a brief training session that would cost$ 21000 after tax. In addition, it would cost $4000 after tax to install this machine correctly. Also, because this machine is extremely efficient, its purchase would necessitate an increase in inventory of $22000. This machine has an expected life of 10 years, after which it will have no salvage value. Assume simplified straight-line depreciation, that this machine is being depreciated down to zero, a 31 percent marginal tax rate, and a required rate of return of 14 percent.

a. What is the initial outlay associated with this project?

b. What are the annual after-tax cash flows associated with this project for years 1 through 9?

c. What is the terminal cash flow in year 10 (that is, the annual after-tax cash flow in year 10 plus any additional cash flows associated with termination of the project)?

d. Should this machine be purchased?

Reference no: EM131563178

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