A firm is considering purchasing a new machine,which costs $600,000 and has a six-year life,a CCA rate of 25 percent,and an expected salvage value of $40,000.The asset class will remain open.The project will generate sales revenue of $200,000 in the first year,which will grow at 6 percent per year in the subsequent years.Variable costs will be $80,000 for the first year,which will grow at 7 percent per year.The firm's marginal tax rate is 35 percent and required return is 10 percent.
A) Calculate the present value of CCA.
B) Calculate the present value of ending cash flow.
C) Calculate the present value of after-tax cost and revenue.
D) Calculate the NPV.
E) Should the project be accepted?

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The Answer of A firm is considering purchasing a new machine,which costs $600,000 and has a six-year life,a CCA rate of 25 percent,and an expected salvage value of $40,000.The asset class will remain open.The project will generate sales revenue of $200,000 in the first year,which will grow at 6 percent per year in the subsequent years.Variable costs will be $80,000 for the first year,which will grow at 7 percent per year.The firm's marginal tax rate is 35 percent and required return is 10 percent.

A Firm Is Considering Purchasing a New Machine,which Costs $600,000