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In: Finance

Please show me how to do the following in excel. An additional "show formulas" would also...

Please show me how to do the following in excel. An additional "show formulas" would also be helpful.

NOK Plastics is considering the acquisition of a new plastic injection-molding machine to make a line of plastic fittings. The cost of the machine and dies is $125,000. Shipping and installation is another $8,000. NOK estimates that new project will require $7,500 in inventory, and result in a $7,500 increase in accounts receivable and a $5,000 increase in accounts payable. The latter three will be recovered at the end of the life of the equipment.

Sales of the new plastic fittings are expected to be $350,000 annually. Cost of goods sold are expected to be 50% of sales. Additional operating expenses are projected to be $115,000 per year over the machine’s expected 5-year useful life. The machine will depreciated using a 5-year MACRS class life. The equipment will be sold at the end of its useful life (5 years) for $35,000.

The tax rate is 25% and the relevant discount rate is 15%.

  1. Calculate the following:
  • net present value (NPV)
  • Internal rate of return (IRR)
  • Payback period (PB)
  • Profitability index (PI)
  1. State whether the project should be accepted.

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