Question

1. Aubie Tech wants to expand their current manufacturing process with a new fully automated plastic molding machine. The machine costs $100,000 including shipping and installation fees. It falls into the MACRS 3-year class and it will have an estimated salvage value of $60,000 when sold after 2 years. The machine will be fully financed from a local bank. The payments are made at the end of each year, $59,169.81 annually for the next two years. The loan amortization schedule is given below. With the purchase of the machine, the company will generate $250,000 extra income per year, but considering the electricity usage, machine programming and regular maintenance, it will add expenses of $50,000 annually. Find the present worth of the project if MARR of the company is 15%. Is this expansion economically attractive? (Hint: You need to find after tax cash flows to figure the present worth of this project.) (60 points) Years Interest Principal Balance 0 1 $12,000.00 $47,169.81 $100,000.00 2 $6,339.62 $52,830.19 $0.00

          1. Aubie Tech wants to expand their current manufacturing process with a new fully automated plastic
molding machine. The machine costs $100,000 including shipping and installation fees. It falls into the MACRS
3-year class and it will have an estimated salvage value of $60,000 when sold after 2 years. The machine will
be fully financed from a local bank. The payments are made at the end of each year, $59,169.81 annually for
the next two years. The loan amortization schedule is given below. With the purchase of the machine, the
company will generate $250,000 extra income per year, but considering the electricity usage, machine
programming and regular maintenance, it will add expenses of $50,000 annually. Find the present worth of
the project if MARR of the company is 15%. Is this expansion economically attractive? (Hint: You need to find
after tax cash flows to figure the present worth of this project.) (60 points)
Years
Interest Principal
Balance
0
1
$12,000.00 $47,169.81 $100,000.00
2
$6,339.62 $52,830.19 $0.00

1. Aubie Tech wants to expand their current manufacturing process with a new fully automated plastic
molding machine. The machine costs 100,000 including shipping and installation fees. It falls into the MACRS
3-year class and it will have an estimated salvage value of60,000 when sold after 2 years. The machine will
be fully financed from a local bank. The payments are made at the end of each year, 59,169.81 annually for
the next two years. The loan amortization schedule is given below. With the purchase of the machine, the
company will generate250,000 extra income per year, but considering the electricity usage, machine
programming and regular maintenance, it will add expenses of 50,000 annually. Find the present worth of
the project if MARR of the company is 15%. Is this expansion economically attractive? (Hint: You need to find
after tax cash flows to figure the present worth of this project.) (60 points)
Years
Interest Principal
Balance
0
112,000.00 47,169.81100,000.00
2
6,339.6252,830.19 0.00

Added by Timothy A.

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