Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 2

A manufacturing company is considering acquiring a new injection-molding machine at a cost of $ 150,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years, after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $11,000. The addition of the machine to the current production facility is expected to generate an annual revenue of $48,000. The firm has only $100,000 available from its equity funds, so it must borrow the additional $50,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 10%. Assume that the asset qualifies for a seven year MACRS property class.
(a) Determine the after-tax cash flows.
(b) Determine the NPW of this project at MARR = 14%.