1) McConachie Company is considering the purchase of a new 400-ton stamping press. The press costs $360,000, and an additional $40,000 is needed to install it. The press will be depreciated straight-line to zero over a five-year life. The press will generate no additional revenues, but it will reduce cash operating expenses by $140,000 annually. The press will be sold for $120,000 after five years. An inventory investment of $60,000 is required during the life of the investment. McConachie is in the 40 percent tax bracket. The required return is 10%.
What is CF5?
a.
154,000
b.
116,000
c.
248,000
d.
132,000
2) McConachie Company is considering the purchase of a new 400-ton stamping press. The press costs $360,000, and an additional $40,000 is needed to install it. The press will be depreciated straight-line to zero over a five-year life. The press will generate no additional revenues, but it will reduce cash operating expenses by $140,000 annually. The press will be sold for $120,000 after five years. An inventory investment of $60,000 is required during the life of the investment. McConachie is in the 40 percent tax bracket. The required return is 10%.
What is the NPV of the project?
a.
-74,256
b.
42,185
c.
-15,365
d.
61,693