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Please show the steps to get Initial Outlay, Annual Cashflows and Terminal Cashflow.

Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 5 years. At the end of the fifth year, the machine will be sold for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%.

Find IRR and NPV.

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019
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Tremont Designs is considering replacing one of its machines. The current equipment was purchased 5 years ago, and its installed cost was $225,000. At that time it was estimated to have a useful life of 10 years. The machine is being depreciated using the simplified straight-line method and has market value today is $10,000. The machine runs 3 shifts each day, two full-time machine operators are required to operate each shift. Each is paid a $40,000 annual salary. The existing machine creates about $20,000 worth of defects per year, and costs $5,000 per year to maintain.

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C) Total Terminal year cash flow in year 5?

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