You are considering an investment in a new machine. The firm’s tax rate is 30%, the risk free rate is 2% and the discount rate is 9%. Answer this question in Excel. Please highlight or circle your answers. The machine is expected to have the following:

Year	Incremental Revenue	Incremental Expenses	Incremental Depreciation	Incremental Change in Net Working Capital	Incremental Capital Spending
0	0	0	0	+20,000	+100,000
1	+20,000	+5,000	+15,000	+2,000	0
2	+20,000	+5,000	+15,000	+2,000	0
3	+20,000	+5,000	+15,000	-5,000	-15,000
4	+30,000	+5,000	+20,000	+2,000	0
5	+30,000	+6,000	+20,000	-21,000	-20,000

1. 
   
2. Questions
3. What is the expected incremental cash flow each year for this new machine?
4. Should you approve this project? Why or why not?

Answer rating: 100% (QA)

To calculate the expected incremental cash flow each year for this new machine we need to compute th... View the full answer