Question

Please show in excel

The initial acquisition costs associated with a programmable machine tool is $35,000. The projected annual benefits are $20,000 and maintenance costs are $10,000. Assuming a useful life of 5yrs, after which the machine will be obsolete with negligible salvage value. Using a MARR of 15%;

Estimate the before tax cash flows and present worth of the investment

Using a tax rate of 35%, estimate the after tax cashflows and present worth of the investment (use the Straight-line depreciation method for estimating depreciation expense in your calculations)

Answer 1

The present worth of the before tax cash flows using excel is calculated as follows

The present worth of the before tax cash flows = - $ 1,478.45

___________________________________________________________________________________

Depreciation expense per year = $ 35,000 5 years

Depreciation expense per year = $ 7000

Before tax cash flows = Revenue - expenses - depreciation

Operating cash flows = (  Revenue - expenses - depreciation ) x ( 1 - tax rate ) + depreciation

The after tax net present worth = - $ 4,998.21

answered by: anonymous