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A computerized machining center has been proposed for a tool manufacturing company. If the new system (which costs $125,000) is installed, it will generate annual revenues of $100,000 and will require $20,000 in labor, $12,000 in annual material expenses, and another $8,000 in annual overhead (power and utility) expenses. The automation facility would be classified as a seven-year MACRS property asset. The company expects to phase out the facility in five years, at which time the project will be sold for $50,000.

Find the year-by-year after-tax net cash flow for the project at a 40% marginal tax rate based on net income, and determine the after-tax present worth of the project at the company's MARR of 15% and the IRR.

Use Excel to produce an Income Statement following the format:

Taxable Income
Net Income

Also show the PW factor calculation by hand and a cash flow diagram.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945496

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