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Mars Inc is considering the purchase of a new machine that costs $80000 This machine will reduce manufacturing costs by $20000 annually Mars will use the 3year MACRS method shown below to

Mars Inc. is considering the purchase of a new machine that costs $80,000. This machine will reduce manufacturing costs by $20,000 annually. Mars will use the 3-year MACRS method (shown below) to depreciate the machine, and it expects to sell the machine at the end of its 5-year life for $10,000 salvage value. The firm expects to be able to reduce net operating working capital by $8,000 when the machine is installed, but the net working capital will return to the original level when the project is over (i.e., after 5 years). Mars's marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature. Calculate the net cash flows of the project. Cash outflows should be negative numbers, and round it to a whole number, e.g., -23,500.

Year MACRS %
1 0.33
2 0.45
3 0.15
4 0.07
5 0.11
6 0.06
CF0  
CF1  
CF2  
CF3  
CF4  
CF5  
 

May 21 2020 View more View Less

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