#### Question Details

Madison Manufacturing is considering a new machine that costs \$350,000 and would reduce pre-tax manufacturing costs by \$110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of \$33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by \$35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 40%, and a 9% cost of capital is appropriate for the project.

\$??
???? %
????? %

Assume management is unsure about the \$110,000 cost savings - this figure could deviate by as much as plus or minus 20%.

Calculate the NPV if cost savings value deviate by plus 20%. Round your answer to the nearest dollar.
\$??
Calculate the NPV if cost savings value deviate by minus 20%. Round your answer to the nearest dollar.

Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis:

 Scenario Probability Cost Savings Salvage Value WC Worst case 0.30 \$??88,000 \$28,000 \$40,000 Base case 0.40 110,000 33,000 35,000 Best case 0.30 132,000 38,000 30,000

Calculate the project's expected NPV. Round your answer to the nearest dollar.
\$??
Calculate the project's standard deviation. Round your answer to the nearest dollar.
\$??
Calculate the project's coefficient of variation. Round your answer to two decimal places

Time line 0 1 2 Cost of equipment -350000 Installation cost 0 Total investment in new machine -350000 Net working capital -40000 0 0 =Initial Investment outlay -390000 Savings 88000 88000 MACR rate...

Solution details:
STATUS
QUALITY
Approved

This question was answered on: Sep 18, 2020

Solution~0001013413.zip (25.37 KB)

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy from our tutoring website www.aceyourhomework.com (Deadline assured. Flexible pricing. TurnItIn Report provided)

STATUS

QUALITY

Approved

Sep 18, 2020

EXPERT

Tutor

### Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.