Filter Solutions is planning to purchase a new - 30400

Solution Posted by
yousafbhutta

yousafbhutta

Rating : (28)C
Solution Detail
Price: $10.00
  • From: Business,
  • Posted on: Wed 06 Nov, 2013
  • Request id: None
  • Purchased: 0 time(s)
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Request Description

Filter Solutions is planning to purchase a new machine with a cost of $150,000 and installation of $30,000.
The machine is expected to have a 4 year life, and depreciation will be straight-line to zero over the life of
the project. Filter expects to sell the machine for $50,000 at the end of year 4. In order to use the new
machine efficiently, net working will increase by $10,000. The new machine is expected to increase
revenues by $60,000 per year and increase expenses by $5,000 per year. The cost of capital is 9% and the
tax rate is 40%.
1. Find the initial cost.
2. Find the yearly operating cash flows.
3. Find the terminal value.
4. Find the NPV.
5. Find the IRR.
6. Should Filter accept the project? Why?

Solution Description

Filter Solutions is planning to purchase a new machine with a cost of $150,000 and installation of $30,000.
The machine is expected to have a 4 yea

Attachments
Filter.xlsx
Filter.xlsx