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In: Accounting

"Your company has asked you to consider the purchase of a new machine for a project....

"Your company has asked you to consider the purchase of a new machine for a project. Details of this potential purchase are provided below.
-The project life is 3 years.
The machine costs $187,000.
* You have decided your company will pay cash for half of this machine immediately, and will borrow the remaining half at 5% annual rate compounded annually over 3 years.
* The machine will be depreciated using a seven year MACRS approach.
Annual O&M costs (expenses) of the machine are $20,000.
Annual labor savings (revenues) are $84,000.
Salvage value at the end of year 3 will be $42,000.
Working capital requirement is initially $28,000. Any investment in working capital will be recovered at the end of the project.
Assume an income tax rate and gains tax rate of 21%.
Find the NPW of this project based on a MARR of 14%."

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Expert Solution

  • Find Table showing Net Present value of this Project:

ekkarill92 answered 2 years ago
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