New equipment must be purchased for use in a warehouse to handle an additional w

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New equipment must be purchased for use in a warehouse to handle an additional workload. The equipment is to handle 8000 tone of goods per year, for which the estimated revenue is $6 per ton. The equipment has an initial cost of $50,000. Its service life is five years and annual operating expenses consist of a fixed cost component of $10,000 and a variable component of $2 per ton. The salvage value of the equipment is negligible. The equipment is to be depreciated by the straight-line method over its service life (do not worry about IRS requirements here). The corporate income tax rate is 40% and internal rate of return is 12% Determine the after tax flows associated with the project. [$50,000 at yr 0 and $17,200 from yr 1 to 5] Determine the after tax net present value of the project.[$12,006] Determine the change in the after tax net present value to a 20% increase in unit variable costs. [NPV decreases by $6.922] Determine the change in the after tax net present value to a 20% decrease in revenue per ton. [NPV decreases by $20,765] To which variable is the net present value more sensitive, unit variable cots or revenue per ton? [Revenue per ton]

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New equipment must be purchased for use in a warehouse to handle an additional w

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