1. Explain the inputs into 1) the net initial investment outlay at year 0, the initial investment $200,000 which include taxes and delivery, and the cost to install the equipment $12,500. The total net cost $212,500. 2) The depreciation tax savings in each year of the projects economic life, this will show how much the tax savings will be depreciated each year using the MACRS method 3) the projects incremental cash flows? This shows the company profit for each of the eight years.
Net Cost MACRS Tax Rate Depreciation Tax Savings
$ 212,500 0.20 $ 42,500 40% $ 17,000
$ 212,500 0.32 $ 68,000 40% $ 27,200
$ 212,500 0.19 $ 40,375 40% $ 16,150
$ 212,500 0.12 $ 25,500 40% $ 10,200
$ 212,500 0.11 $ 23,375 40% $ 9,350
$ 212,500 0.06 $ 12,750 40% $ 5,100
2. What is the project’s NPV? The Net Present Value is $36,955.09 Explain the......
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