Determine the Irr and the Npv for Each of These Two Projects. What Should Henn Corp Decide About Each Proposed Project.

Topics: Investment, Cash flow, Net present value Pages: 3 (616 words) Published: March 11, 2013

(Each Problem worth 5 Points) Please complete any 4 problems (must do problem 3) and complete any 1 remaining for Bonus worth 1.5 points. Please show all work.

1.A drill press costs $30,000 and is expected to have a 10 year life. The drill press will be depreciated on a straight-line basis over 10 years to a zero estimated salvage value. This machine is expected to reduce the firm's cash operating costs by $4,500 per year. If the firm is in the 40 percent marginal tax bracket, determine the annual net cash flows generated by the drill press.

2.Felix Industries purchased a grinder 5 years ago for $15,000. It is being depreciated on a straight-line basis over 15 years to an estimated salvage value of zero. It could be sold now for $6,000. The firm is considering selling it and purchasing a new one. The new grinder would cost $25,000 installed and would be depreciated on a straight-line basis over 10 years to a zero estimated salvage value. The company's marginal tax rate is 40%. Determine the net investment if the old grinder is sold and the new one purchased.

3.Degnan Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given as of today.

Table One:
|Facts | | |Existing Machine | |Proposed Machine | |Costs | 100,000.00 | | 150,000.00 | |Installation | 10,000.00 | | 20,000.00 | |MACRS |5 - Years | |5 - Years | |Market Value | 105,000.00 | | | |Purchased |2 years ago | | |

Table Two
|Forecasted Revenues | |Year |Existing Machine | |Proposed Machine | |1 | 160,000.00 | | 170,000.00 | |2...
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