(Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a...

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(Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a chemical-analysis machine. Although the machine being considered would result in an increase in earnings before interest and tax of $35,000 per year, it has a purchase price of $100,000 and it would cost an additional $5,000 after tax to correctly install this machine. In addition, to operate this machine, inventory would have be increased by $5,000. This machine has an expected life of 10 years, after which it will have no salvage value. Assume the following: simplified straight-line depreciation to a book value of zero, a 30% marginal tax rate and a required rate of return of 15%. a. What is the initial cash outlay associated with this project? b. What are the annual net cash flows associated with this project for years 1 to 9? c. What is the terminal cash flow in year 10 (that is, the annual free cash flow in a. The initial cash outlay associated with this project is $ nearest dollar.) (Round to the b. The annual net cash flows associated with this project for years 1 to 9 are $ (Round to the nearest dollar.) c. The terminal cash flow in year 10 (the annual free cash flow in year 10 plus any additional cash flow associated with termination of the project) is $ . (Round to the nearest dollar.) d. Given the information, the machine (Select the best choice below.) O A. should not be purchased because the NPV is - $64,383, making it an unacceptable investment for the company. B. should be purchased because the NPV is $64,383, making it a worthwhile investment for the company. (Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a chemical-analysis machine. Although the machine being considered would result in an increase in earnings before interest and tax of $35,000 per year, it has a purchase price of $100,000 and it would cost an additional $5,000 after tax to correctly install this machine. In addition, to operate this machine, inventory would have be increased by $5,000. This machine has an expected life of 10 years, after which it will have no salvage value. Assume the following: simplified straight-line depreciation to a book value of zero, a 30% marginal tax rate and a required rate of return of 15%. a. What is the initial cash outlay associated with this project? b. What are the annual net cash flows associated with this project for years 1 to 9? c. What is the terminal cash flow in year 10 (that is, the annual free cash flow in a. The initial cash outlay associated with this project is $ nearest dollar.) (Round to the b. The annual net cash flows associated with this project for years 1 to 9 are $ (Round to the nearest dollar.) c. The terminal cash flow in year 10 (the annual free cash flow in year 10 plus any additional cash flow associated with termination of the project) is $ . (Round to the nearest dollar.) d. Given the information, the machine (Select the best choice below.) O A. should not be purchased because the NPV is - $64,383, making it an unacceptable investment for the company. B. should be purchased because the NPV is $64,383, making it a worthwhile investment for the company.