Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine originally cost $552 and was bought Three (3) years ago (i.e. it has depreciated for three years). It could be sold today for $330 or sold in two years for $66. The New machine would cost $556 and could be sold in two years for $227. The new machine is more efficient than the old machine and would reduce waste, and therefore the cost of materials, by $179 per year. Due to the lower waste, we could also have a one-time reduction in inventory of 17. The firm's tax rate is 41%. Both machines are in the 4 year MACRS class, with depreciation amounts of 15%, 45%, 33% and 7%. What are the Operating Cash Flows in the first year (Year 1) with the new machine?

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Please find the answer to your question attached. I gave you a little more than you requested in an attempt to make the concepts clearer to you.

Answer:
The question provided you with so much information that you might be confused as to the relevance of it all. The fact is that you have enough information here to solve for the initial investment of the project, as well as, the operating cash flows in each year of the project's life.
However, your question only required you to determine the operating cash flow in the first year of the projects life. To help you understand the information given I ...

Solution Summary

This solution shows a step by step guide on how to determine the initial investment on a long-term project. It also explains the methods available for analyzing the project cash flows and deciding whether the firm should invest in that project.

Scott Corporation's new project calls for an investment of $10,000. It has an estimated life of 10 years. The IRR has been calculated to be 15 percent. If cashflows are evenly distributed and the tax rate is 40 percent, what is the annual before-tax cashflow each year? (Assume depreciation is a negligible amount.)
a. $1

** Please see the attached file for the complete problem description **
Hello, I have been having difficulties with a problem relating to cashflowanalysis. Your assistance in the matter would be greatly appreciated.
Dunder-Mifflin, Inc. is analyzing the potential profitability of three printing jobs put up for bid by th

See the attachment.
A company is considering which of two mutually exclusive projects it should undertake. The Finance Director thinks that the project with the higher NPV should be chosen whereas the Managing Director thinks that the one with the higher IRR should be undertaken especially as both projects have the same initi

A project has an expected risky cashflow of $500, in year 4. The risk-free rate is 4%, the market rate of return is 13%, and the project's bea is 1.2 Calculate the certainty equivalent cashflow for year 4.

If the appropriate discount rate for the following cashflows is 12.25 percent per year, what is the present value of the cashflows?
Year 1 Cashflow is $1500.
Year 2 cashflow is $3200.
Year 3 cashflow is $7200.
Year 4 cashflow is $9600.

Foster Industries has a project which has the following cashflows:
Year CashFlow
0 -$300.00
1 100.00
2 125.43
3 90.12
4 ?
What cashflow will the project have to generate in the fourth year in order for the project to have a 15% rate of return?

1.What are the free cashflows in years 2 and 10 that should be used to evaluate the proposed project?
Ans. ______________
Free cashflow for the following years:
Year 2 =
Year 10 =
2. If the cost of capital for this project is 14%, what is your estimate of the value of the new project?
Ans. ___________

$2,566.70 in a project that is promising to return 12 percent per year. The cashflows are expected to be as follows:
End of Cash
Year Flow
1 $325
2 400
3 550
4 ?
5 750
6 800
What is the cashflow at the end of the 4th year?

Project with a 3 year life has the following probability distibutions for possible end of year cashflows in each of the next 3 years.
Year 1 Year 2 Year 3
Prob Cashflow Prob Cashflow Prob Cashflow
.30 $300 .15 $100