A machine is to be purchased for $80,000. The entire amount is to be borrowed with the stipulation that it has to be repaid at the end of two years, which is the life of the project, at 15% compounded annually. The machine is expected to provide an annual revenue of $8,000 for two years and is to be depreciated using a MACRS rate of 0.4500 in year 1, 0.5500 in year 2. The cash expense for the machine is $500 per year. The working capital required is $20,000 and is fully recovered at the end of year 2. The salvage value of the machine at the end of the second year is expected to be $5,000. Assume an income tax rate of 40% and a MARR of 20%. Based on the data provided above, determine the following,
a. A loan amortization table determining the principal payment, the interest expenses and the annual payment.
b. A depreciation table using the depreciation rate provided in the problem. [1 points]
c. The capital gain / loss of the machine at the end of year 2
d. Using the information given and the calculated values in parts a, b and c, determine the after tax cash flow for the project: Develop the Income Statement Develop the Cash flow Statement Is this project justifiable at a MARR of 20%? Calculate the NPV of the Project. Calculate the IRR of the Project. If an error is returned in Excel, Why?