Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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New - Project Analysis
Madison Manufacturing is considering a new machine
that costs $350.000 and would reduce pre-tax
manufacturing costs by $110.000 annually. Madison
would use the 3-year MACRS method to depreciate
the machine, and management thinks the machine
would have a value of $33,000 at the end of its 5-year
operating life. The applicable depreciation rates are
33.33%. 44.45%. 14.81%. and 7.41%. Working capital
would increase by $35,000 initially, but it would be
recovered at the end of the project's 5-year life.
Madison's marginal tax rate is 25%, and a 14% cost of
capital is appropriate for the project.
Calculate the project's NPV, IRR, MIRR, and payback.
Do not round intermediate calculations. Round the
monetary value to the nearest dollar and percentage
values and payback to two decimal places. Negative
values, if any, should be indicated by a minus sign.
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Transcribed Image Text:Answered Partially Correct Question Workspace Check My Work eBook New - Project Analysis Madison Manufacturing is considering a new machine that costs $350.000 and would reduce pre-tax manufacturing costs by $110.000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%. 44.45%. 14.81%. and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 25%, and a 14% cost of capital is appropriate for the project. Calculate the project's NPV, IRR, MIRR, and payback. Do not round intermediate calculations. Round the monetary value to the nearest dollar and percentage values and payback to two decimal places. Negative values, if any, should be indicated by a minus sign.
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