Question: Question 2B (3 marks) Progressive Ltd is planning to purchase a new machine with an estimated cost of $400,000. It will be depreciated using straight-line

Question 2B (3 marks)

Progressive Ltd is planning to purchase a new machine with an estimated cost of $400,000. It will be depreciated using straight-line to zero method over a 5-year period. The additional annual revenues are $250,000 whereas the additional annual operating expenses are $90,000. An inventory investment of $85,000 is required during the life of the investment. The machine will be sold for $70,000 after 5 years. The corporate tax rate is 30% and the cost of capital is 12%. Compute the net cash flow for this project. How much is the project NPV?

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