PT Mithlab plans to buy a new machine. The following data and information for the machine the.
 Cost of new machine $400,000.
 Shipping and installation costs $20,000.
 An additional $25,000 in net working capital is required at the time of installation.
 The project will add $220,000 annually in revenue, but increase operating costs by $30,000 per year and reduced the cost of failed products by $10,000
 Age of the machine 5 years and the life of the project for 3 years
 The salvage value at the end of year 3 is $200,000.
Notes:
Income Tax Rate 34%
Rate of Return 12%
Depreciation uses the Straight line method
Requested :
a. Calculate the net cash flow (Free Cash Flow) from the machine
b. Determine whether the procurement of new machines can be done or not by using Net Present Value method!

Answer rating: 100% (QA)

Requested a Calculate the net cash flow Free Cash Flow from the machine b ... View the full answer