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A new machine is to be purchased for $200,000. The company believes it will generate $75,000 annually in revenue due to the purchase of this machine. The company will have to train an operator to run this machine and this will result in additional labor expenses of $25,000 annually. The new machine will be depreciated using 5 years MACRS, even though the life of the project is 7 years, and the salvage value is estimated to be $0 at the end of year 7. The tax rate is 40% and the company's MARR is 15%. What is the initial cash flow (at time=0) for this project? a. 200,000 Ob..50.000 . 0 d. 200.000 QUESTION 2 What is the Present Worth of this project, using MARR=15%? a. -$2,123 O b. $8,934 b O c. $24,292 O d. $158,400 QUESTION 3 What is the depreciation (in dollars) in year 4? O a. $26,960 O b. $25,000 O c. $23,040 O d. $15,392 QUESTION 4 In which year did the company pay the least taxes? O a. 1 Ob. 2 O c. 3 O d. 4 QUESTION 5 In that year from the previous question, how much did the company pay in taxes? O a. $9,088 O b. $4,480 O c. $4,000 O d. 50 How much additional tax (gains tax) will the company pay in year 7 if they sell the machine at that time for $100,000 a. 540,000 b. 530,000 OC 57.500 d.o QUESTION 7 What is the internal Rate of Return (IRR) for this project? a. 129 b.13.1% OC 15.8% d. 16.4% it annual revenues are only $74,000 per year and labor costs are expected to increase by $1,000 per year (Clarification: Labor year 1 $25.000 year 2 $26,000 year 3 $27.000., etc.) is this project still worth it for an MARR of 15%? (Assume that you can still tell the machine for $100,000 after year 7) Yes No 20 poil QUESTION 10 What is the present worth (value) of the project for the conditions in #9 above? a $8,413 5.50 OC 51 229 d. 53.433 QUESTION 11 Asuming that all the original predictions are correct (575,000 revenue/year, Salvage value of $100,000, etc, BUT labor increases by per year what is the present worth of the project and should you proceed with it? 51.264, yes go for it 5128, no it's not worth it -51.234, no way! Orip a coint

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