1 Problem 12-18 -- Scenario Analysis 2 Your 3 Problem Questions 4 a. What is the tractor's NPV given a life of... Answers a.1 5 Years? a.2 4 Years? a.3 8 Years? 7 b. What is the tractor's Expected NPV? 9 Problem Parameters 10 New Machine Cost 11 Annual Increase in Operating Cash Flows (Pre-Tax) 12 Annual After-Tax Increase in Operating Cash Flow (1-T) 13 Straightline Annual Depreciation (5 Years) 14 After-Tax Cash Flow Impact of Depreciation 15 Machine's Salvage Value 16 Marginal Tax Rate 17 WACC Values ($36,000) $12,000 $7,200 $7,200 $0 40% 10% 18 1 Problem 12-18 -- Scenario Analysis 2 Your 3 Problem Questions 4 a. What is the tractor's NPV given a life of... Answers a.1 5 Years? a.2 4 Years? a.3 8 Years? 7 b. What is the tractor's Expected NPV? 9 Problem Parameters 10 New Machine Cost 11 Annual Increase in Operating Cash Flows (Pre-Tax) 12 Annual After-Tax Increase in Operating Cash Flow (1-T) 13 Straightline Annual Depreciation (5 Years) 14 After-Tax Cash Flow Impact of Depreciation 15 Machine's Salvage Value 16 Marginal Tax Rate 17 WACC Values ($36,000) $12,000 $7,200 $7,200 $0 40% 10% 18