This is the exact post of the assignment i double checked the numbers and everything is...

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This is the exact post of the assignment i double checked thenumbers and everything is correct
Tough Steel, Inc. is a processor of stainless steel products.The firm is considering replacing an old stainless steeltube-making machine for a more cost-effective machine that can meetthe firm’s quality standards
? The old machine was acquired 2 years ago at an installed costof $500,000. It has been depreciated under the MACRS’s 5-yearrecovery period, and has a remaining economic life of 5 years. Itcan be sold today for $350,000 before taxes, but if the firmdecides to keep it, it can be sold for $100,000 before taxes at theend of year 5.
? The first option is Machine A, which can be purchased for$600,000, but will require $30,000 in installation costs. Thismachine would be depreciated under the MACRS’s 3- year recoveryperiod. At the end of its economic life, the machine will have asalvage value of $350,000 before taxes. This machine would requirean investment in net working capital of $100,000.
? The second option is Machine B, which can be purchased for$550,000, but requires $20,000 in installation costs. This machinewould be depreciated under the MACRS’s 5- year recovery period. Atthe end of its economic life, the machine would have a salvagevalue of $330,000 before taxes. This machine requires no investmentin net working capital.
The firm has estimated the following EBIT for all threemachines: EBIT Year Old machine Machine A Machine B 1 $90,000$90,000 $120,000 2 $90,000 $10,000 $20,000 3 $120,000 $150,000$120,000 4 $150,000 $230,000 $200,000 5 $150,000 $270,000$200,000
The firm’s WACC is 14% and its tax rate is 40%.
a) Calculate the following cash flows for the old machine,machine A, and machine B:
? initial investment,
? annual after-tax cash flows for each year, and
? the terminal cash flow.
b) Determine which machine is more profitable for the companybased on
? the payback period,
? discounted payback period,
? net present value,
? profitability index,
? internal rate of return, and
? modified internal rate of return.

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This is the exact post of the assignment i double checked thenumbers and everything is correctTough Steel, Inc. is a processor of stainless steel products.The firm is considering replacing an old stainless steeltube-making machine for a more cost-effective machine that can meetthe firm’s quality standards? The old machine was acquired 2 years ago at an installed costof $500,000. It has been depreciated under the MACRS’s 5-yearrecovery period, and has a remaining economic life of 5 years. Itcan be sold today for $350,000 before taxes, but if the firmdecides to keep it, it can be sold for $100,000 before taxes at theend of year 5.? The first option is Machine A, which can be purchased for$600,000, but will require $30,000 in installation costs. Thismachine would be depreciated under the MACRS’s 3- year recoveryperiod. At the end of its economic life, the machine will have asalvage value of $350,000 before taxes. This machine would requirean investment in net working capital of $100,000.? The second option is Machine B, which can be purchased for$550,000, but requires $20,000 in installation costs. This machinewould be depreciated under the MACRS’s 5- year recovery period. Atthe end of its economic life, the machine would have a salvagevalue of $330,000 before taxes. This machine requires no investmentin net working capital.The firm has estimated the following EBIT for all threemachines: EBIT Year Old machine Machine A Machine B 1 $90,000$90,000 $120,000 2 $90,000 $10,000 $20,000 3 $120,000 $150,000$120,000 4 $150,000 $230,000 $200,000 5 $150,000 $270,000$200,000The firm’s WACC is 14% and its tax rate is 40%.a) Calculate the following cash flows for the old machine,machine A, and machine B:? initial investment,? annual after-tax cash flows for each year, and? the terminal cash flow.b) Determine which machine is more profitable for the companybased on? the payback period,? discounted payback period,? net present value,? profitability index,? internal rate of return, and? modified internal rate of return.