Home / Questions / Incremental cash flows and NPV Procter & Gamble is considering buying a new machine that c...
Incremental cash flows and NPV) Procter & Gamble is considering buying a new machine that costs $100,000. The machine requires $8,000 in setup costs that are expensed immediately and $12,000 in additional working capital. The machine's useful like is 10 years, after which it can be sold for a salvage value of $30,000. The machine requires a maintenance overhaul costing $14,000 at the end of year 7. The overhaul is fully expensed when it is done. P&G uses straight-line depreciation, and the machine will be depreciated to a book value of zero on a six-year basis. P&G has a tax rate of 40% and the project's cost of capital is 13%. The machine is expected to increase revenues minus expenses by $55,000 per year. What is the NPV of buying the machine?
Possible answers:
-$46,321.89 |
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-$23,389.21 |
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-$455.93 |
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$924.45 |
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$21,588.71 |
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$36,833.33 |
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$57,222.22 |
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$87,395.33 |
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$94,183.52 |
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