Jonhson Products is considering purchasing a new milling machine that costs $100,000. The machine’s installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Jonhson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Jonhson’s marginal tax rate is 40 percent. a. Calculate the project’s net investment (NINV) b. Calculate the annual straight-line depreciation for the project.
Jonhson Products is considering purchasing a new milling machine that costs $100,000. The machine’s installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Jonhson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Jonhson’s marginal tax rate is 40 percent. a. Calculate the project’s net investment (NINV) b. Calculate the annual straight-line depreciation for the project.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 4P
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- Jonhson Products is considering purchasing a new milling machine that costs
$100,000. The machine’s installation and shipping costs will total $2,500. If accepted,
the milling machine project will require an initial net working capital investment of
$20,000. Johnson plans to
period of 8 years about a year ago, Jonhson paid $10,000 to a consulting firm to
conduct a feasibility study of the new milling machine. Jonhson’s marginal tax rate is
40 percent.
a. Calculate the project’s net investment (NINV)
b. Calculate the annual straight-line depreciation for the project.
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