Question

**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 effect on revenues, but pretax
labor costs would decline by $56,000 per year. The marginal tax
rate is 45%, and the WACC is 11.77%. Also, the firm spent $15,000
last year investigating the feasibility of using the
machine.**

**What are the project’s cash flows at year 1 (1 point)
and year 2 (1 point)? Round answers to nearest cent (two decimal
places).** **You must show your work to receive full
credit**

Answer #1

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
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...

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...

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...

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...

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...

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 $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...

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