(Answered) A new machine with a preliminary estimate of cost at yen80

Finance

A new machine with a preliminary estimate of cost at ¥80 million is expected to save your company ¥30 million per year for 5 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 5-year period to an estimated salvage value of ¥0. The firm's marginal tax rate is 30 percent. The company has a WACC of 8.9%

Should the company proceed with the project based on the expected values?

The costs and revenue estimates provided above have a standard deviation of approximately 20% of their expected value. Provide advice to the board of your company with respect to how you should proceed with the project given the implied forecasting risk.

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