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 firm’s 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 aftertax cash flows for each year and determine the NPV, the IRR, and the payback....
View
Full Document
 Winter '08
 sloan
 Management, Working Capital, Net Present Value, aftertax cash flows, Cash Flow Problem

Click to edit the document details