Question: I need help with this question. Mostly part B.... Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs

I need help with this question. Mostly part B....

Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 11% cost of capital is appropriate for the project.

A. Calculate the project's NPV. Round your answer to the nearest dollar.

$

Calculate the project's IRR. Round your answer to two decimal places.

%

Calculate the project's MIRR. Round your answer to two decimal places.

%

Calculate the project's payback. Round your answer to two decimal places.

B. Assume management is unsure about the $110,000 cost savings - this figure could deviate by as much as plus or minus 20%. Calculate the NPV if cost savings value deviate by plus 20%. Round your answer to the nearest dollar.

$

Calculate the NPV if cost savings value deviate by minus 20%. Round your answer to the nearest dollar.

$

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!