Riverview Company is evaluating the proposed acquisition of a new production machine. The base price of the machine is $200,000 and installation costs would be $28,000. In addition, $10,000 in net working capital would be required for installation. The machine will be depreciated over 3 years using simplified straight-line depreciation. The machine would save the company $110,000 per year in operating costs. The company plans to keep the machine in place for 5 years. At the end of the fifth year, the machine will sell for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%.

What is the NPV of the project?

Crossroad Corporation is trying to decide whether to invest in automating a production line. If the project is accepted, labor costs will decrease by $672,000 per year. However, other cash operating expenses will increase by $234,000 per year. The equipment will cost $309,000 and is depreciable over 8 years using a simplified straight line to zero salvage value. Crossroad will invest $28,000 in net working capital in the facility. The company has a marginal tax rate of 34%. Calculate the firm's annual cash flows associated with the new project.

Set your calculator to 4 decimal places and round to a whole number at the end. Do not enter the dollar sign. For example, if your answer is 1000, enter it as 1000.

Answer rating: 100% (QA)

To calculate the NPV Net Present Value of the project for Riverview Company we need to determine the annual cash flows and discount them back to the p... View the full answer