This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Given: Building cost is $60,000. Machine cost is $9,400. Shipping cost for machine is $600. Investment in Net Working Capital (NWC) is $5,000. All costs above will be paid in 2003. Beginning in 2004, the machine will be depreciated using MACRS: Year: 1 2 3 4 Rate: 33% 45% 15% 7% Beginning in 2004, the building will be depreciated using MACRS: Year: 1 2 3 4 Rate: 1.0% 2.0% 2.0% 2.0% Beginning in 2004, annual revenues are expected to be $30,000 and annual costs will be $14,000. The firms tax rate is 30% and their cost of capital is 10%. This investment is to be evaluated over a 5 year period (2003 2007). At the end of 5 years, the machine will be sold for $500 and the building will be sold for $50,000. Calculate the after-tax cash flows for each year and determine the NPV, the IRR, and the payback....
View Full Document