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Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost $190,000, and it will cost another $33,000 to modify it for special use by the firm.

The machine falls into the MACRS 3-year class, and it will be sold after 3 years of use for $110,000.

The machine will require an increase in net working capital of $9,000 and will have no effect on revenues, but is expected to save the firm $90,000 per year in before-tax operating costs, mainly labour.

The company's marginal tax rate is 40%. What is the NPV for the proposed acquisition if the cost of capital is 14%?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92800634

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