FINANCE-Calculate NPV, IRR, PI, DPB, PB for the following project

1) Calculate NPV, IRR, PI, DPB, PB for the following project:initial machine cost = $1,000,000, discount rate = 14%, tax rate = 33%, project life = 7 years (use MACRS), sales for the first year = $250,000 and are expected to increase 20% through year 5, but sales in year 6 & 7 will be stable at year 5’s number, costs = 58% of sales per year with a one-time software upgrade cost of $10,000 in year 4, scrap value for the machine at the end of year 7 = $50,000 (50 points)2) XYZ Inc. presently is operating a machine that costs $50,000 to run annually. A sales rep has provided some information on a new machine that is more productive and energy efficient. This machine will have a useful life of 7 years, cost $38,000 to purchase, and has $42,500 in annual costs. Should XYZ purchase this new machine if the discount rate is 10% (10 points)3) ACE Co. is considering the purchase of two machines. Machine A costs $100,000 with annual cost of $20,000. It will last for 5 years, and have a salvage value of $5,000 at the end of 5 years. Machine B costs $145,000 with annual costs of $17,500, and has a useful life of 8 years. The discount rate is 10%. Which machine should the company buy? (10 points)4) You purchased a CNC lathe 5 years ago for $150,000. The IRS categorizes this machine as 7 year property. You need to replace the machine with a more efficient model and have just sold the lathe for $50,000. Your firm is in the 25% marginal tax bracket. What is the net cash flow from the sale of this machine? (10 points)5) Calculate PB, DPB, NPV, IRR and PI for the following project: net cash flows for this 5 year project are: $250,000, $300,000, $400,000, $500,000 and $200,000 with an initial investment of $425,000. You use a discount rate of 12% and your tax rate is 30%. The machine will be sold in year 5 for $37,500 and it is 5-year property. The sale of the machine has not been calculated in year 5’s net cash flow of $200,000. (20 points)



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