Please help how I would do this. Thanks.
Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years, and it can be depreciated according to the following rates. The firm expects to operate the machine for 4 years and then to sell it for $12,500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV?
Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years, and it can be depreciated according to the following rates. The firm expects to operate the machine for 4 years and then to sell it for $12,500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?
| | Depreciation |
| Year | Rate |
| 1 | 0.20 |
| 2 | 0.32 |
| 3 | 0.19 |
| 4 | 0.12 |
| 5 | 0.11 |
| 6 | 0.06 |
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV?
| WACC | 10.0% |
| Pre-tax cash flow reduction for other products (cannibalization) | $ 5,000 |
| Investment cost (depreciable basis) | $80,000 |
| Straight-line deprec. rate | 33.333% |
| Sales revenues, each year for 3 years | $67,500 |
| Annual operating costs (excl. deprec.) | $25,000 |
| Tax rate | 35.0% |