Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually.

Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project’s 5-year life. Madison’s marginal tax rate is 40%, and a 9% cost of capital is appropriate for the project.

  1. Calculate the project’s NPV. Round your answer to the nearest dollar.  $   
  2. Calculate the project’s IRR. Round your answer to two decimal places %  
  3. Calculate the project’s MIRR. Round your answer to two decimal places % 
  4. Calculate the project’s payback. Round your answer to two decimal places
  5. Assume management is unsure about the $110,000 cost savings – this figure could deviate by as much as plus or minus 20%. 
  6. Calculate the NPV if cost savings value deviate by plus 20%. Round your answer to the nearest dollar. $   
  7. Calculate the NPV if cost savings value deviate by minus 20%. Round your answer to the nearest dollar. $  
  8. Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine’s salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis:                                                                                                                                                                                                                                                                                        ScenarioProbabilityCostSavingsSalvage ValueWCWorst case0.30$  88,000$28,000$40,000Base case0.40110,00033,00035,000Best case0.30132,00038,000

    30,000

     Calculate the project’s expected NPV. Round your answer to the nearest dollar. $   

  9. Calculate the project’s  standard deviation. Round your answer to the nearest dollar. $   
  10. Calculate the project’s coefficient of variation. Round your answer to two decimal places

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more