A fully automatic chucker and bar machine is to be purchased for $45,000. The money will be

Question:

A fully automatic chucker and bar machine is to be purchased for $45,000. The money will be borrowed with the stipulation that it be repaid with six equal end-of-year payments at 12% compounded annually. The machine is expected to provide annual revenue of $13,000 for six years and is to be depreciated by the MACRS seven-year recovery period. The at the end of six years is expected to be $4,000. Assume a marginal tax rate of 35% and a of 15%.
(a) Determine the after-tax cash flow for this asset over six years.
(b) Determine whether the project is acceptable on the basis of the IRR criterion. Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...