Question 2 Alvin Printing is considering new printing machine whose data are shown below. The equipment...

 

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Question 2 Alvin Printing is considering new printing machine whose data are shown below. The equipment has a 4-year tax life and would be fully depreciated by the straight-line method over 4 years, but it would have a positive pre-tax salvage value at the end of Year 4, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 4-year life. Calculate the project's NPV and IRR. WACC Net investment in new printing machine Transportation and Insurance of new printing machine Training of staff on how to use the new printing machine Required net operating working capital Annual sales revenues Annual operating costs (excl. depreciation) Expected pre-tax salvage value Tax rate (10 marks) 10.0% $120,000 $20,000 $5,000 $10,000 $100,000 $30,000 $4,000 25.0% Question 2 Alvin Printing is considering new printing machine whose data are shown below. The equipment has a 4-year tax life and would be fully depreciated by the straight-line method over 4 years, but it would have a positive pre-tax salvage value at the end of Year 4, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 4-year life. Calculate the project's NPV and IRR. WACC Net investment in new printing machine Transportation and Insurance of new printing machine Training of staff on how to use the new printing machine Required net operating working capital Annual sales revenues Annual operating costs (excl. depreciation) Expected pre-tax salvage value Tax rate (10 marks) 10.0% $120,000 $20,000 $5,000 $10,000 $100,000 $30,000 $4,000 25.0%

Answer rating: 100% (QA)

To calculate the projects net present value NPV and internal rate of return IRR we need to determine the cash flows associated with the project and di... View the full answer