Hello Experts- I need help with the following question please!!. All previous an

Question

Hello Experts- I need help with the following question please!!. All previous answers were incorrect or answered incomplete. Please provide a detailed, clear and step by step answer in excel and show formulas if posible. Thank you in advance for your help!

The injection molding machines are need to be replaced. The list is narrowed down to two options based on various parameters like screw diameter, injection pressure, injection capacity, rate, and screw rpm and so on. Please take a look at the specs and make a recommendation. The Cincinnati Milacron Plastic Injection Molding Machine costs $80,000 and the Kawaguchi machine costs $120,000. Based on the capacity of these machines, it can be safely estimated that the revenue for Cincinnati will be $30,000 for year 1 and $41,500 for Kawaguchi. It is also assumed that the capacity could be increased and thereby the revenue by 20% year after year for the next few years. The maintenance costs will be $2,000 and the amount will increase by $5,000 year after year for the next few years. It can be assumed that the maintenance is the same for both machines. In talking with other companies who use these machines, these machines are capable of producing products for 5 years before major breakdowns occur. Since this is a rough estimate, you can use straight line depreciation. Tax rate for this company is 40%. Assume an after-tax MARR of 15% and calculate the PW of the after tax cash flow. Also, perform a sensitivity analysis on MARR with plus or minus 5%. (Hint: use DATA TABLE)

Explanation / Answer

Cincinnati Year Revenue Maintenance Depreciation CF before Tax CF after Tax @ 60% Depreciation Net Cash Flow PVF @ 15% PV 1 30,000 2,000 16,000 12,000 7,200 16,000 23,200 0.870 20,184.00 2 36,000 7000.00 16,000 13,000 7,800 16,000 23,800 0.756 17,992.80 3 43,200 12000.00 16,000 15,200 9,120 16,000 25,120 0.658 16,528.96 4 51,840 17000.00 16,000 18,840 11,304 16,000 27,304 0.572 15,617.89 5 62,208 22000.00 16,000 24,208 14,525 16,000 30,525 0.497 15,170.83 TOTAL 85,494.47 Less: Initial Investment 80,000.00 PW 5,494.47 Kawaguchi Year Revenue Maintenance Depreciation CF before Tax CF after Tax @ 60% Depreciation Net Cash Flow PVF @ 15% PV 1 41,500 2,000 24000 15,500 9,300 24000 33,300 0.870 28,971.00 2 49,800 7000.00 24000 18,800 11,280 24000 35,280 0.756 26,671.68 3 59,760 12000.00 24000 23,760 14,256 24000 38,256 0.658 25,172.45 4 71,712 17000.00 24000 30,712 18,427 24000 42,427 0.572 24,268.36 5 86,054 22000.00 24000 40,054 24,033 24000 48,033 0.497 23,872.22 TOTAL 1,28,955.71 Less: Initial Investment 1,20,000.00 PW 8,955.71

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