You are to evaluate the proposed acquisition of a new machine which can be purchased for 60,000 including shipping, modification and installation costs. The machine falls uno the MACRS three year class life (33,45,15,7) and it will be sold after three years for 20,000. Use of the machine will require an increase in net operating working capital of 2000. The machine is expected to increase revenues by 20,000 per year. The firm's marginal tax rate is 40%
Calculate the free cash flow for year 0
What is the operating cash flow for Year 1?
Operating cash flow for year 2?
Operating cash flow for year 3?
What is the after tax cash flow from the sale of the machine in year 3?
What is the free cash flow for year 3
Calculate the NPV for the project if the required rate of return is 10%