(Calculating project cash flows and? NPV)??The Chung Chemical Corporation is considering the purchase of a chemical...

90.2K

Verified Solution

Question

Finance

(Calculating project cash flows and? NPV)??The Chung ChemicalCorporation is considering the purchase of a chemical analysismachine. Although the machine being considered will result in anincrease in earnings before interest and taxes of
$ 34 comma 000$34,000
per? year, it has a purchase price of
?$85 comma 00085,000?,
and it would cost an additional
?$8 comma 0008,000
after tax to correctly install this machine. In? addition, toproperly operate this? machine, inventory must be increased by
?$3 comma 5003,500.
This machine has an expected life of
1010
?years, after which it will have no salvage value. ? Also,assume simplified? straight-line depreciation, that this machine isbeing depreciated down to? zero, a
3636
percent marginal tax? rate, and a required rate of return of
99
percent.
a.??What is the initial outlay associated with this?project?
b.??What are the annual? after-tax cash flows associated withthis project for years 1 through
99??
c.??What is the terminal cash flow in year
1010
?(that is, the annual? after-tax cash flow in year
1010
plus any additional cash flows associated with termination ofthe? project)?
d.??Should this machine be? purchased?
a.??The initial cash outlay associated with this project is
?$nothing.
? (Round to the nearest? dollar.)

Answer & Explanation Solved by verified expert

4.4 Ratings (690 Votes)

NPV IS ROUNDED TILL See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

(Calculating project cash flows and? NPV)??The Chung ChemicalCorporation is considering the purchase of a chemical analysismachine. Although the machine being considered will result in anincrease in earnings before interest and taxes of$ 34 comma 000$34,000per? year, it has a purchase price of?$85 comma 00085,000?,and it would cost an additional?$8 comma 0008,000after tax to correctly install this machine. In? addition, toproperly operate this? machine, inventory must be increased by?$3 comma 5003,500.This machine has an expected life of1010?years, after which it will have no salvage value. ? Also,assume simplified? straight-line depreciation, that this machine isbeing depreciated down to? zero, a3636percent marginal tax? rate, and a required rate of return of99percent.a.??What is the initial outlay associated with this?project?b.??What are the annual? after-tax cash flows associated withthis project for years 1 through99??c.??What is the terminal cash flow in year1010?(that is, the annual? after-tax cash flow in year1010plus any additional cash flows associated with termination ofthe? project)?d.??Should this machine be? purchased?a.??The initial cash outlay associated with this project is?$nothing.? (Round to the nearest? dollar.)