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Consider following condition for previous question: The investor takes $200,000 loan (at time zero) to purchase the machine at 8% interest rate. Loan has to be repaid by constant annual payments from year 1 to year 5 (5 payments). Assume 40% tax and minimum rate of return 10%. Calculate interest and principle for the payments, BTCF, ATCF, NPV and IRR for this investment

AND PREVIOUS QUESTION IS:

$400,000 capital cost required for purchasing a machine (at time zero) that can generate revenue of $180,000 with operating cost of $35,000 for five years (from year 1 to year 5). The capital cost is depreciable over 6 years (from year 0 to year 5) based on MACRS 5-year life depreciation with the half year convention (table A-1 at IRS). The salvage value will be zero and working capital $50,000. Please calculate NPV and ROR for this project considering the minimum rate of return 12% and 38% income tax.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91608377

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