UAE Manufacturing is considering the purchase of a new production machine for SAR 600,000. The purchase of this machine will result in an increase in earnings before interest and taxes of SAR 175,000 per year. To operate this machine properly, workers would have to go throught a brief training session that would cost SAR 30,000 after taxes. It would cost SAR 10,000 to install the machine properly. Also, because the machine is extremely efficient, its purchase would necessitate an increase in inventory or SAR 40,000. This machine has an expected life of 10 years, after which it will have no salvage value. Assume simplified straight-line decpreciation and that this machine is being depreciated down to zero, a 27 percent marginal tax rate, and a required rate of return of 12 percent.
Change in EBIT 141,000 Purchase Price 483,000 Training Session Fee 17,000 Installation Fee 14,500 Increase in Inventory 15,000 Life 10 Salvage Value 0 Depreciation 52,600 Tax Rate 27% Required rate of return 12%
What are the annual after-tax cash flows associated with this project for years 1 through 9?
Differential Annual Free Cash Flows (Years 1-9)
Cash Flow =
Change in EBIT =
Change in taxes =
Change in depreciation =
Project's Free Cash Flows =
Note: Please make it as an excel financial calculations