NEED A PERFECT PAPER? PLACE YOUR FIRST ORDER AND SAVE 15% USING COUPON:

4.8/5

solution

You have been asked by the president and CEO of Kidd Pharmaceuticals to evaluate the proposed acquisition of a new labeling machine for one of the firm’s production lines. The machine’s price is $50,000, and it would cost another $10,000 for transportation and installation. The machine falls into the MACRSthree-year class, and hence the tax depreciation allowances are 0.33, 0.45, and 0.15 in Years 1, 2, and 3, respectively. The machine would be sold after three years because the production line is being closed at that time. The best estimate of the machine’s salvage value after three years of use is $20,000. The machine would have no effect on the firm’s sales or revenues, but it is expected to save Kidd $20,000 per year in before-tax operating costs. The firm’s tax rate is 40 percent and its corporate cost of capital is 10 percent.

a. What is the project’s net investment outlay at Year 0?

b. What are the project’s operating cash flows in Years 1, 2, and 3?

c. What are the terminal cash flows at the end of Year 3?

d. If the project has average risk, is it expected to be profitable?

Solution:

15% off for this assignment.

Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!

Why US?

100% Confidentiality

Information about customers is confidential and never disclosed to third parties.

Timely Delivery

No missed deadlines – 97% of assignments are completed in time.

Original Writing

We complete all papers from scratch. You can get a plagiarism report.

Money Back

If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.

WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!