Assume everything is given in n=0, CONSTANT dollars unless otherwise stated:

Hartsfield Company is considering purchasing a set of machine tools at a cost of $80,000. The purchase is expected to generate revenues of $28,000. The purchase of the tools will also lead to higher operating costs of $6,000 per year in each of the next three years. Additional profits will be taxed at a rate of 30%. The asset falls into CCA Class 45 (rate = 40%) for tax purposes and the 50% rule applies. The project has a three-year life. The constant-dollar market (re-sale) value of the machine tools is expected to fall by 30% annually. The company will require a working capital of $8,000 to be maintained in purchasing power over the lifetime of the project, and can be recovered at the time of the projects completion.

The general inflation rate is 5% per year (and affects everything that it normally affects). Assume a MARR =8%.

Note: If a taxable net income is negative you just treat it the same way you would if it was positive.

(Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar. Note: .5 rounds up)

The NPW of the project of the project is within $50 of

Question 16 options:

-6711

-8952

-9592

-14,461

-6857

None of the above