Sudsy Cleaners, Inc. is analyzing the proposed purchase of a new machine for $55

Question

Sudsy Cleaners, Inc. is analyzing the proposed purchase of a new machine for $550,000. The proposed machine has an estimated economic life of six years but will be treated as five-year MACRS property for depreciation purposes. The machine will increase the firm's capacity, and it is expected to contribute $176,000 annually to earning before depreciation, interest and taxes. The firm is in a 30% tax bracket and estimates its cost of captial to be 16%. Calculate the NPV and IRR of this investment using an Excel spreadsheet.

I've done the calculations in Excel using formulas, including NPV and IRR and would like to make sure I'm on the right track. Also is there a way to do the IRR calculation or to do the information on the left side in a different way so that I don't have to list the cost and revenues separately for all of the calculations including IRR?

Explanation / Answer

Sudsy Cleaners, Inc. is analyzing the proposed purchase of a new machine for $55

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