Imagine you are the project manager at an investment firm and given the task of preparing a report (essay) addressing several companies' projects' evaluations. Use the supplied information for each project to answer the associated questions. Your deliverable is a professionally prepared MS Excel file, MS Word report (essay) applying APA 7 formatting and a quick information sheet. In your recommendation/conclusion of your report identify the best project to invest in and give reasons why. The quick information sheet is this document with the blanks filled out for each question area. Carolina Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. The sale of an existing gluer would partially offset this outlay. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $15,000. The existing gluer has a remaining useful life of five years. If held until year 5, the existing machine's market value would be zero. Over its five-year life, the new machine should reduce operating costs (excluding depreciation) by $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gains. Project 3 Questions: 1) The payback period for the project is . 2) The tax effect of the sale of the existing asset is . 3) The initial outlay for this project is . 4) The present value of the project's annual cash flows is . 5) The net present value of the project is . 6) The internal rate of return for the project is .

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter12: Professional Venture Capital

Section: Chapter Questions

Problem 5EP

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Imagine you are the project manager at an investment firm and given the task of preparing a report (essay) addressing several companies' projects' evaluations. Use the supplied information for each project to answer the associated questions. Your deliverable is a professionally prepared MS Excel file, MS Word report (essay) applying APA 7 formatting and a quick information sheet. In your recommendation/conclusion of your report identify the best project to invest in and give reasons why. The quick information sheet is this document with the blanks filled out for each question area.

Carolina Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. The sale of an existing gluer would partially offset this outlay. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $15,000. The existing gluer has a remaining useful life of five years. If held until year 5, the existing machine's market value would be zero. Over its five-year life, the new machine should reduce operating costs (excluding depreciation) by $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gains.

Project 3 Questions:

1) The payback period for the project is ________.

2) The tax effect of the sale of the existing asset is ________.

3) The initial outlay for this project is ________.

4) The present value of the project's annual cash flows is ________.

5) The net present value of the project is ________.

6) The internal rate of return for the project is ________.

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