You had to buy two machines to handle the sever load. Those machines cost a total of $3,500. In addition, you just bou

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You had to buy two machines to handle
the sever load. Those machines cost a total of
$3,500. In addition, you just bought some office
furniture for a total of $1,000. All of these costs represent net
capital spending and can all be depreciated as MACRS 3-year
property classes. In addition, the firm will require increasing NWC
by $900 initially.
Your estimate for users is as
follows: Year 1: 1600; Year 2: 2750; Year 3: 3800; Year
4: 4,000; Year 5: 4,500.
You plan to run the company for five
years. At the completion of this time period, you think
the machines will worth $1,200, but the office furniture will be
worthless. You can recover 90% of the initial increase
in NWC at that time.
The firm’s “k” is assumed to be
10%. Your goal today is to value the company as of the
data assumed above.
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
NPV: ________
PB: _________
MACRS Depreciation Schedule
Property Class
Year
3-year
5-year
7-year
1
33.33
20.00
14.29
2
44.44
32.00
24.49
3
14.82
19.20
17.49
4
7.41
11.52
12.49
5
11.52
8.93
6
5.76
8.93
7
8.93
8
4.45