Only in excel. No hard coded.

A B BUYING A PHOTOCOPIER 2 Discount rate 11% 3 Tax rate 40% 5 10,000 Regular photocopier 6 Cost 7 Life (years) 8 Depreciation 9 Annual maintenance costs 5 1,500 10 11 Color photocopier 12 Cost 30,000 13 Life (years) 14 Depreciation 15 Annual maintenance costs 4,500 16 Annual revenue increase 8,500 17 18 Regular photocopier cash flows 19 Year 20 Purchase copier 21 Depreciation tax shield 22 After-tax maintenance 23 Cash flow 24 NPV 1 2 25 42 0 1 4 5 26 27 Color photocopier cash flows 28 Year 29 Purchase copier 30 Depreciation tax shield 31 After-tax maintenance 32 Incremental revenue, after-tax 33 Cash flow 34 NPV 35 36 Answer: 37 38 39 40 41 12 12. (Cash-flow analysis) A company is considering whether to buy a regular or color photocopier for the office. The cost of the regular machine is $10,000. its life span is 5 years, and the company has to pay another $1,500 annually in maintenance costs. The color photocopier's price is $30,000, its life span is also 5 years, and the annual maintenance costs are $4,500. Compared to the regular photocopier, the color photocopier is expected to increase the revenue of the office by $8,500 annually before taxes. For both machines, the depreciation is straight-line to zero salvage value, and this salvage value is also the assumed market value at the end of the machines' lives. Assuming that the company is profitable and pays 40% corporate tax, the relevant dis- count rate is 11%. Which photocopy machine should the firm buy? 13 Cach AQT Online 1 A B BUYING A PHOTOCOPIER 2 Discount rate 11% 3 Tax rate 40% 5 10,000 Regular photocopier 6 Cost 7 Life (years) 8 Depreciation 9 Annual maintenance costs 5 1,500 10 11 Color photocopier 12 Cost 30,000 13 Life (years) 14 Depreciation 15 Annual maintenance costs 4,500 16 Annual revenue increase 8,500 17 18 Regular photocopier cash flows 19 Year 20 Purchase copier 21 Depreciation tax shield 22 After-tax maintenance 23 Cash flow 24 NPV 1 2 25 42 0 1 4 5 26 27 Color photocopier cash flows 28 Year 29 Purchase copier 30 Depreciation tax shield 31 After-tax maintenance 32 Incremental revenue, after-tax 33 Cash flow 34 NPV 35 36 Answer: 37 38 39 40 41 12 12. (Cash-flow analysis) A company is considering whether to buy a regular or color photocopier for the office. The cost of the regular machine is $10,000. its life span is 5 years, and the company has to pay another $1,500 annually in maintenance costs. The color photocopier's price is $30,000, its life span is also 5 years, and the annual maintenance costs are $4,500. Compared to the regular photocopier, the color photocopier is expected to increase the revenue of the office by $8,500 annually before taxes. For both machines, the depreciation is straight-line to zero salvage value, and this salvage value is also the assumed market value at the end of the machines' lives. Assuming that the company is profitable and pays 40% corporate tax, the relevant dis- count rate is 11%. Which photocopy machine should the firm buy? 13 Cach AQT Online 1