A manufacturing company is considering acquiring a new injection-molding machine at a cost of $150,000. Because...

 

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A manufacturing company is considering acquiring a new injection-molding machine at a cost of $150,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years, after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $11,000. The addition of the machine to the current production facility is expected to generate an annual revenue of $48,000. The firm has only $100,000 available from its equity funds, so it must borrow the additional $50,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 25%. Assume that the asset qualifies for a seven-year MACRS property class. Click the icon to view the MACRS depreciation schedules. Click the icon to view the interest factors for discrete compounding when /= 14% per year. (a) Determine the after-tax cash flows. Fill in the table below. (Round to one decimal place.) Net After-Tax Cash Flow thousand $ $ thousand S thousand Period 0 1 2 A manufacturing company is considering acquiring a new injection-molding machine at a cost of $150,000. Because of a rapid change in product mix, the need for this particular machine is expected to last only eight years, after which time the machine is expected to have a salvage value of $10,000. The annual operating cost is estimated to be $11,000. The addition of the machine to the current production facility is expected to generate an annual revenue of $48,000. The firm has only $100,000 available from its equity funds, so it must borrow the additional $50,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. The applicable marginal income tax rate for the firm is 25%. Assume that the asset qualifies for a seven-year MACRS property class. Click the icon to view the MACRS depreciation schedules. Click the icon to view the interest factors for discrete compounding when /= 14% per year. (a) Determine the after-tax cash flows. Fill in the table below. (Round to one decimal place.) Net After-Tax Cash Flow thousand $ $ thousand S thousand Period 0 1 2

Answer rating: 100% (QA)

First of all we have to determine the interest amount that we will be p... View the full answer