Answer Happy

Use the following to answer questions the next 4 questions: The managers of RustyParts, Inc. plan to manufacture engine blocks for classic cars from the 1960s era. They expect to sell 250 blocks annually for the next 5 years. The necessary foundry and machining equipment will cost a totalefe $800,000 and will be depreciated on a straight-line basis to zero over the project's life. The firm expects to be able to dispose of the manufacturing equipment for $150,000 at the end of the project. Labor and materials costs total $500
per engine block, fixed costs are $125,000 per year. Assume a 35% tax rate and a 12% discount rate. 12. What is the annual depreciation tax shield for this project? a $ 20,000 b. $ 56,000 c. $100,000 d. $104,000 e. $120,000 13. What is the expected aftertax cash flow to the firm when the equipment is sold in year 5? a. $ 65,000 b. $ 97,500 c. $100,000 d. $115,000 e. $120,125 14. What is the minimum bid price the firm should set as a sale price for the blocks if the firm were in a bidding situation? a. $1,692 b. $1,927 c. $2,382 d. $2,564 e. $2,821 15. Assume that management believes that auto restorers will pay $3,000 retail per engine block. What is the NPV of this project? a. $260,769 b. $401,187 c. $521,309 d. $628,744 e. $644,678