Question: Please help in excel. I couldnt solve in excel? HOW CAN I SOLVE IN EXCEL PLS HELP Wilson Machine Tools, Inc. a manufacturer of fabricated
Please help in excel. I couldnt solve in excel? HOW CAN I SOLVE IN EXCEL PLS HELP
Wilson Machine Tools, Inc. a manufacturer of fabricated metal products, is considering to purchase a high-tech milling machine at a cost of $95,000. The cost of installing the machine, preparing the site and rearranging other equipments is expected to be $15,000. This installation cost will be added to the cost of the machine, in order to determine the total cost basis for depreciation. Special jigs and tool dies for the particular product will also be required at a cost of $10,000. The milling machine is expected to last 10 years, but the jigs and dies will have an economic life of only 5 years. Therefore, another set of jigs and dies has to be purchased at the end of 5 years. The milling machine will have a $10,000 salvage value at the end of its economic life, and the jigs and dies will be worth only $300 as scrap metal for resale. The milling machine is classified as a 7-year MACRS property, and the jigs and dies are classified as a 3-year MACRS property. With the new milling machine, Wilson expects an annual revenue of $80,000 from increased production. The annual production costs are estimated as follows: Materials = $9,000 Labor = $15,000 Energy = $4,500 O&M Costs = $3,000 Wilson is considering to utilize debt financing for the entire purchase of the milling machine and jigs & ties. Total investment will be financed by a debt ratio of 40%. The loan will be borrowed at an annual interest rate of 12%. Wilsons income tax rate is expected to remain at 25% over the project life of 10 years. All dollar figures are in todays dollars. The firms mareket interest rate is 18%, and the expected general inflation rate during the project life is 6%. a) Determine the project cash flows in the absence of inflation. b) Determine the net present worth (NPW) and internal rate of return (IRR) for the project, based on your analysis on (a). c) Suppose that Wilson expects the following price increases during the project life: Materials at 4% per year Labor at 5% per year Energy at 3% per year O&M costs at 3% per year To compensate for these increases in prices, Wilson is planning to increase annual revenue at the rate of 7% per year by charging its customers a higher price. No changes in the price and salvage value are expected for the machine, the jigs and dies. Determine the project cash flow in actual dollars. d) From your analysis in part (c), determine the real (interest-free) rate of return of the project. e) Determine the economic gain or loss in present worth caused by inflation
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