Question

**NEW PROJECT ANALYSIS**

You must evaluate a proposal to buy a new milling machine. The base price is $176,000, and shipping and installation costs would add another $8,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $123,200. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $6,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $60,000 per year. The marginal tax rate is 35%, and the WACC is 12%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.

What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations.

Year 1:

Year 2:

Year 3:

Answer #1

NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new
milling machine. The base price is $188,000, and shipping and
installation costs would add another $11,000. The machine falls
into the MACRS 3-year class, and it would be sold after 3 years for
$65,800. The applicable depreciation rates are 33%, 45%, 15%, and
7%. The machine would require a $4,000 increase in net operating
working capital (increased inventory less increased accounts
payable). There would be no effect on...

You must evaluate a proposal to buy a new milling machine. The
base price is $184,000, and shipping and installation costs would
add another $10,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $82,800. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $6,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

You must evaluate a proposal to buy a new milling machine. The
base price is $184,000, and shipping and installation costs would
add another $10,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $82,800. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $6,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

You must evaluate a proposal to buy a new milling machine. The
base price is $102,000, and shipping and installation costs would
add another $18,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $66,300. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $4,500 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

NEW PROJECT ANALYSIS
You must evaluate a proposal to buy a new milling machine. The
base price is $138,000, and shipping and installation costs would
add another $20,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $75,900. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $9,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on...

You must evaluate a proposal to buy a new milling machine. The
base price is $148,000, and shipping and installation costs would
add another $11,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $103,600. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $9,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

You must evaluate a proposal to buy a new milling machine. The
base price is $143,000, and shipping and installation costs would
add another $7,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $50,050. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $9,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

You must evaluate a proposal to buy a new milling machine. The
base price is $177,000, and shipping and installation costs would
add another $9,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $61,950. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $9,500 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on revenues, but pretax...

Dayman Inc. has asked you to evaluate a proposal to buy
a new costume machine. The base price is $112,000, and shipping and
installation costs would add another $25,000. The machine falls
into the MACRS 3-year class, and it would be sold after another 3
years for $35,000. The applicable depreciation rates are 33%, 45%,
15%, and 7%. The machine would require a $7,500 increase in net
operating working capital (increased inventory less increased
accounts payable). There would be no...

You must evaluate a proposal to buy a new milling machine. The
purchase price of the milling machine, including shipping and
installation costs, is $152,000, and the equipment will be fully
depreciated at the time of purchase. The machine would be sold
after 3 years for $71,000. The machine would require a $3,500
increase in net operating working capital (increased inventory less
increased accounts payable). There would be no effect on revenues,
but pretax labor costs would decline by $55,000...

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