8 . a . You have been asked by the president and CEO of Kidd Pharmaceuticals to
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Question:
a You have been asked by the president and CEO of Kidd Pharmaceuticals to evaluate the proposed acquisition of a new labeling machine for one of the firm's production lines. The machine's price is $ and it would cost another $ for transportation and installation. The machine falls into the MACRS threeyear class, and hence the tax depreciation allowances are and in Years and respectively. The machine would be sold after three years because the production line is being closed at that time. The best estimate of the machine's salvage value after three years of use is $ The machine would have no effect on the firm's sales or revenues, but it is expected to save Kidd $ per year in beforetax operating costs. The firm's tax rate is percent and its corporate cost of capital is percent.
What is the project's net investment outlay at Year
Answer to the nearest dollar.
b Following from the previous question, what is the net salvage value of the machine in Year
Answer to the nearest dollar.
c Following from the previous questions, what is the project's operating cash flow in Year
Answer to the nearest dollar.
d Following from the previous questions, what is the project's operating cash flow in Year
Answer to the nearest dollar.
e Following from the previous questions, what is the project's net cash flow in Year
Answer to the nearest dollar.
f Following from the previous questions, what is the NPV of the project?
Answer to the nearest cent.
Related Book For
Gapenski's Healthcare Finance An Introduction To Accounting And Financial Management
ISBN: 9781640551862
7th Edition
Authors: Kristin L. Reiter, Paula H. Song
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