$800,000 capital cost required for purchasing a machine (at time zero) that can generate revenue of $325,000 with operating cost of $75,000 for seven years (from year 1 to year 7). The capital cost is depreciable over 8 years (from year 0 to year 7) based on MACRS 7-year life depreciation with the half year convention (table A-1 at IRS). The salvage value will be $200,000 (zero book value) and working capital $100,000. Please calculate NPV and ROR for this project considering the minimum rate of return 10% and 35% income tax.
The investor takes $400,000 loan (half of the capital cost) at time zero to purchase the machine at 4% interest rate. Loan has to be repaid by constant annual payments from year 1 to year 7 (7 payments). Calculate interest and principle for the payments, BTCF, ATCF, NPV and ROR for this investment.