QUESTION 6 \"You are considering the purchase of a new machine for a project. De

Question

QUESTION 6 "You are considering the purchase of a new machine for a project. Details of this potential purchase are provided below The project life is 3 years The machine costs $184,000 * You will pay cash for half of this machine immediately, and will borrow the remaining half at 8.2% annual rate compounded annually over 3 years * The machine will be depreciated using a seven year MACRS approach Annual O&M; costs (expenses) of the machine are $18,000 Annual labor savings (revenues) are $120,000 Salvage value at the end of year 3 will be $60,000 Working capital requirement is initially $37,000. Any investment in working capital will be recovered at the end of the project. Assume an income tax rate and gains tax rate of 35% Find the NPW of this project based on a MARR of 15.1%."

Explanation / Answer

PV = FV * (1 / (1+i)n)

= 92000 * (1 / (1 + 0.082)3

= 92000 * (1 / 1.2667)

= 92000 * 0.7894

= 72624.8

So the NPW for this project based on MARR of 15.1% is Dollar 72624.8

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.