PLEASE DO NO USE EXCEL, as we are not able to use excel on our test...

PLEASE DO NO USE EXCEL, as we are not able to use excel on our test

XYZ company is considering a new machine that costs $300,000 and would reduce pre-tax manufacturing costs by $108,000 annually. XYZ would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $23,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The net operating working capital (NOWC) would increase by $25,000 initially, but it would be recovered at the end of the project's 5-year life. XYZ's marginal tax rate is 40-percent, and a 10% WACC is appropriate for the project. a) Calculate the projects NPV, IRR, and Payback. b) Assume management is unsure about the $90,000 cost savings, and this figure could deviate by as much as +/- 15%. What would the NPV have to be under each of these situations?

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jeff jeffy answered 1 year ago

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Typed please. How do our ears work? How do we hear sound waves?

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