New project analysis You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500.
The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15, and 7 percent. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues,
but pre-tax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
a. How should the $5,000 spent last year be handled?
b. What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?
c. What are the net operating cash flows during Years 1, 2, and 3?
New project analysis You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would
The management of cooper Equipment is planning to purchase a new milling machine that will cost 160,000 installed.The old machine has been fully depreciated but can be sold for 15,000. The new machine will be depreciated on a
An interest rate( is it variable-relevant or fixed irrelevant for year 1,2,3,4?) of 11.5%, from a 4 years loan to buy a machine( will last 5 years) on the last day of the company'previous financial year , should it be allocated in
Question What are the differences between an internal proposal and an external proposal? Also I need to summarize why the two proposal types are different in terms of the following elements: Consider the following scenario:
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