Purchase Solution

# Net Present Value of Investment in Machine

Not what you're looking for?

Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by \$6,000 annually and increase earnings before depreciation and taxes by \$6,000 annually. Stanton will use the MACRS method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for \$10,000 before taxes. Stanton's marginal tax rate is 40 percent, and it uses a 9 percent cost of capital to evaluate projects of this type. If the machine's cost is \$40,000, what is the project's NPV? [MACRS table required] Select the closest answer.

\$1,014
\$2,292
\$4,626
\$414
\$6,050

##### Solution Summary

Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by \$6,000 annually and increase earnings before depreciation and taxes by \$6,000 annually. Stanton will use the MACRS method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for \$10,000 before taxes. Stanton's marginal tax rate is 40 percent, and it uses a 9 percent cost of capital to evaluate projects of this type. If the machine's cost is \$40,000, what is the project's NPV? [MACRS table required] Select the closest answer.

\$1,014
\$2,292
\$4,626
\$414
\$6,050

##### Free BrainMass Quizzes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

##### Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

##### IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

##### Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations