A manufacturing company is considering acquiring a new injection-molding machine at the cost of $120,000. Because of rapid change in product mix, the need for this machine is expected to last only eight years, after which time the machine is expected to have a salvage value of $10,000. The Annual operating cost is estimated to be $11,000. The addition of the machine to the current production facility is expected to generate an annual revenue of $48,000. The firm has only $70,000 available for its equity funds, so it must borrow additional $50,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal amounts. The applicable marginal income tax rate for the firm is 40%. Assume that the asset qualifies for a seven year MACRS property class.
(a) Determine the tax after cash flows.
(b) Determine the NPW of this project at MARR= 14%.