You purchased a machine for $500,000 (installed), and you depreciated it using a

Question

You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS. This machine generates $200,000 in annual revenue. In year 4, you sold the machine for $250,000. You received a loan for $400,000 on a 5 year loan at 5% (note, you must pay the remaining balance of this loan at the end of year 4 from the proceeds of the sale). In addition, you invested $80,000 in working capital initially. Your company is in a 35% tax bracket. MARR =15.36% Generate your cash flow analysis using Actual Dollars. In other words, inflate your revenue, salvage value, expenses and Working Capital accordingly. What is your Market NPW??inflation rate =3%?

Explanation / Answer

MACR 5 year depreciation rate

Now working of laon

Repayment on annual basis for NPW calculation = 92390  

Remaining loan at end of 4th year = $ 88,175.63

NPW calculation below

Assumptions: Cost Escalation Factor( yearly) 3.00% Benefit Escalation Factor(yearly) 3.00% Income Tax Rate 35.00% MARR 15.36%

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