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Evanston Quick-Print Shop is considering a new automatic copying

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2. Evanston Quick-Print Shop is considering a new automatic copying machine that can be purchased for $14,800. Delivery will cost $300 and set-up will cost $500. The machine will be paid for and placed in service Dec 31,1993. It will be depreciated using a 5 year MACRS technique. The firm currently faces a 40% tax bracket.;a. What is the initial relevant cash flow to acquire the machine?;b. The copying machine described above, is expected to last for 5 years, during which it will produce approximately 1 mil copies. Copies will sell for an average of 6 cents each. Material, labor, and other variable costs will be approximately 3 cents a copy. Working capital needs will be negligible as copying with this machine will be almost all on a cash basis, and current liabilities will offset the supplies inventory need. Determine the relevant cash flow for 1994 through 1998.;c. The copying machine described above is sold at the end of the 5 year life for $500. What is the terminal cash flow?;d. Evanston Quick-Print has a required return of 14%. Is the copying machine an attractive investment?;Additional Requirements;Level of Detail: Show all work

 

Paper#21849 | Written in 18-Jul-2015

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