• A renowned automobile company is considering purchasing a machine that will boost up the production capacity by using an automated line of production. The machine's basic price is $170,000, and it will cost another $35,000 to modify it for special use by the company, and another $15,000 for installation. This machine falls into the CCA class 38 (d = 30%). It will be sold after three years for $80,000. The purchase of the machine will boost sales and cause an increase in revenue of $100,000 per year. The firm's marginal tax rate (federal plus provincial) is 45%, and it's MARR is 15%.
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• (a) Is this project acceptable, based on the most likely estimates given?
•  (b) Suppose that the project will require an increase in net working capital (spare-parts inventory) of $15,000, which will be recovered at the end of year 3. Taking this new requirement into account, would the project still be acceptable? 
• (c) If the firm's MARR is increased to 20%, what would be the required increase in revenue?

Answer rating: 100% (QA)

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