A Machine That Costs $8000

1 ) A machine that costs 8000 is expected to scat for 10 years . The ectimated salvage value at the final stage of 10 years is 0 . The machine is expected to hold back the company 1554 per year before taxes and depreciation . The company depreciates its assets on a straight-line basis and has a marginal tax yard of 40 percent . What is the internal deem of return on this investment 1554 (1-0 .4 932 .4 (Savings tax rate Cash flow by and by taxesGetting the Net Present Value : At 3 intimacy rate 932 .4 (PVIFA 3 ,10 ) - 8000 NPV 932 .4 (8 .53 ) - 8000 - 46 .

628Therefore , at a 3 interest rate , the company is at a lossAt 2 interest rate 932 .4 (PVIFA 2 ,10 ) - 8000 NPV 932 .4 (8 .983 ) - 8000 375 .75Therefore , for NPV 0 , interest rate is somewhere in between 2 and 3To solve for NPV 0 375 .75 46 .63 422 .3846 .63 /422 .38 0 .11043 -0 .1104 2 .89IRR therefore should be 2 .89See section PAGE 110th yr 8000 932 .4...If you want to take up a full essay, order it on our website: Orderessay

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