Question: Mars Inc. is considering a 5-year project that requires a new machine that costs $58,000, and an additional net working capital of $2,000, which will
Mars Inc. is considering a 5-year project that requires a new machine that costs $58,000, and an additional net working capital of $2,000, which will be recovered when the project ends in 5 years. This project would increase the firm's revenues by $20,000 per year and its operating costs by $8,000 per year. Mars will use the 3-year MACRS to depreciate the machine, and it expects to sell the machine at the end of the project for $18,000. The firm's marginal tax rate is 31 percent, and the project's cost of capital is 14 percent. What is the net cash flow at year 5, the final year? MACRS 3-year schedule is as follows: 33%, 45%, 15%, and 7% for years 1 to 4, respectively
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