1. Suppose you purchase a machine for $112,000. The machine falls into the 3-year class for MACRS. If the machine is sold at the end of the second year for $56,000, what are the after-tax proceeds from the sale assuming the tax rate is 34%?

2. Giggles, Inc. is considering the purchase of a new laughing gas machine. The machines base price is $70,000, and it would cost another $15,000 to install it and get it ready for use. The machine falls into the MACRS 5-year class or it can be depreciated straight-line over 6 years to a zero salvage value. The machine will be sold after 3 years for $30,000. The firms marginal federal-plus-state tax rate is 40 percent and it uses a 9 percent cost of capital to evaluate projects of this nature.

a. Calculate the depreciation schedule using straight-line depreciation.

b. Calculate the depreciation schedule using MACRS depreciation.

c. Calculate the after-tax salvage value of the machine if the straight line depreciation method is used.

d. Calculate the after-tax salvage value of the machine if the MACRS depreciation method is used.

e. Find the NPV of the machine if straight line depreciation is used.

f. Find the NPV of the machine if MACRS depreciation is used.

3. You are evaluating a project with the following estimated cash flows:

Year	Cash Flow (In thousands)
0	-100
1	50
2	50
3	50
4	-30
5	10

Depreciation, salvage values, net working capital requirements, and taxes are all included in these cash flow estimations.

a. Construct an NPV profile using interest rates between 0% and 75% in increments of 5%. Explain the pattern.

b. Assuming a cost of capital of 10%, compute the modified internal rate of return. Show all of your work. Given your result, should the project be accepted?

c. (EXCEL TEMPLATE) Using the MIRR function in Excel, confirm your previous