Argyl Manufacturing is evaluating the possibility of expanding its operations. This expansion will require the purchase of land at a cost of $140,000. A new building will cost $140,000 and will be depreciated on a straight-line basis over 20 years to a salvage value of $0. Actual land salvage at the end of 20 years is expected to be $240,000. Actual building salvage at the end of 20 years is expected to be $180,000. Equipment for the facility is expected to cost $210,000. Installation costs will be an additional $40,000 and shipping costs will be $10,000. This equipment will be depreciated as a 7-year MACRS asset. Actual estimated salvage at the end of 20 years is $0. The project will require net working capital of $55,000 initially (year 0), an additional $50,000 at the end of year 1, and an additional $50,000 at the end of year 2. The project is expected to generate increased EBIT (operating income) for the firm of $120,000 during year 1. Annual EBIT is expected to grow at a rate of 3 percent per year until the project terminates at the end of year 20. The marginal tax rate is 40 percent. Use Table 9A-3 and Table I to answer the questions below. Round your answers to the nearest dollar.
Compute the initial net investment.
$
Compute the annual net cash flow from the project in year 20.
$
Extracted text: TABLE I Future Value Interest Factor (FVIF) ($1 at i % per period for n periods); FVIF = (1 + i)"; FV, = PV, (FVIF,in) Period, n 1% 2% 1.000 1.000 1.020 1.030 3% 4% 5% 6% 7% 8% 9% 10% 1.000 1.100 11% 1.000 1.110 12% 1.000 1.120 13% 1.000 1.070 1.000 1.000 1.040 1.000 1.000 1.060 1.000 1.080 1.000 1.090 1.000 1.130 1.010 1.050 1.103 1.158 1 1.020 1.030 1.040 1.061 1.093 1.061 1.082 1.125 1.254 1.405 1.124 1.191 1.262 1.338 1.419 1.145 1.166 1.260 1.188 1.295 1.412 1.539 1.210 1.331 1.232 1.368 1.277 1.443 1.225 4 1.041 1.082 1.126 1.170 1.216 1.311 1.360 1.464 1.518 1.574 1.630 1.051 1.104 1.159 1.217 1.276 1.403 1.469 1.611 1.685 1.762 1.842 1.062 1.072 1.083 1.094 6. 7 1.126 1.194 1.149 1.230 1.265 1.316 1.340 1.407 1.477 1.551 1.501 1.606 1.587 1.677 1.828 1.772 1.949 1.870 2.076 1.974 2.211 2.082 2.353 1.504 1.714 8. 9. 1.172 1.267 1.195 1.305 1.369 1.423 1.594 1.689 1.718 1.838 1.851 1.999 1.993 2.172 2.144 2.358 2.305 2.558 2476 2.773 3.106 2.658 3.004 1.105 1.219 1.344 1.243 1.268 1.629 1.791 2.367 2.594 2.853 3.138 10 1.480 1.967 2.159 2.839 3.395 2.580 2.813 11 1.116 1.127 1.384 1.426 1.539 1.601 1.710 1.796 1.898 2.012 2.105 2.252 2.332 2.518 3.152 3.498 3.479 3.896 3.836 4.335 12 13 14 1.138 1.149 1.294 1.469 1.319 1.513 1.665 1.732 1.886 1.980 2.133 2.261 2.410 2.579 2.720 2.937 3.066 3.342 3.452 3.797 3.883 4.310 4.363 4.887 4.898 5.535 3.642 3.970 4.328 4.717 15 1.161 1.346 1.558 1.801 2.079 2.397 2.759 3.172 3.426 4.177 4.785 5311 5.474 6.130 6.254 1.373 2.952 4.595 5.054 5.560 16 1.173 1.605 1.873 2.183 2.540 7.067 1.184 1.196 6.866 7.690 7.986 17 18 1.400 1.653 1.428 1.948 2.026 2.292 2.407 2527 2.653 2.693 2.854 3.026 3.207 4.049 4.292 3.159 3.380 3.700 3.996 5.895 6.544 1.702 1.754 1.486 1.806 9.024 19 20 1.208 1.220 1.270 7.263 8.062 12.239 8.613 9.646 1.457 2.107 2.191 3.617 3.870 4.316 4.661 5.142 6.116 10.197 11.523 6.728 5.604 7.911 6.341 6.848 24 1.608 2.033 2.563 3.225 5.072 5.427 9.850 15.179 18.790 21.231 25 1.282 1.641 2.094 2.666 3.386 8.623 10.835 13.585 17.000 30 40 1.348 1.489 2.427 1.811 2.208 3.262 3.243 4.801 4.322 7.040 5.743 7.612 10.286 14.974 10.063 21.725 13.268 31.409 17.449 45.259 22.892 65.001 29.960 93.051 39.116 132.782 50 60 1.645 1.817 2.692 4.384 5.892 3.281 7.107 11.467 10.520 18.679 18.420 29.457 32.988 57.946 101.257 46.902 74.358 117.391 304.482 184.565 289.002 524.057 897.597 450.736 176.031 1,530.05 Period, n 14% 15% 16% 17% 18% 1.000 1.180 19% 20% 24% 28% 32% 36% 40% 1.000 1.320 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.280 1.000 1.000 1.140 1.150 1.160 1.170 1.190 1.200 1.240 1.360 1.400 1.960 2 1.300 1322 1.346 1.369 1.392 1.416 1.440 1.538 1.638 1.742 1.850 1.482 1521 1.749 2.011 1.907 2.300 2.515 2.744 3.842 5378 3 1.561 1.602 1.643 1.685 1.728 2.067 1.874 2.192 1.939 2.288 4. 1.689 1.925 1.811 2.100 2.436 2.826 2.005 2.386 2.074 2.488 2.364 2.932 2.684 3.436 3.036 4.007 3.421 4.653 6. 7. 2.195 2502 7530 10.541 2313 2.565 3.001 2.700 2.840 2.986 3.583 3.635 4.508 4.398 5.629 5.290 6.983 6.328 8.605 2.660 3.185 3.379 2.853 3.252 3.278 3.803 5.590 6.931 3.511 4.108 4.807 5.624 4.021 7.206 9.223 11.703 14.758 20.661 8. 3.059 3.518 3.759 4.435 4.300 9.217 12.166 9 4.785 5.160 15.917 10 11 3.707 4.226 4.046 4.652 4.411 5.117 5.234 6.176 5.695 6.777 6.192 7.430 8.594 10.657 13.215 11.806 15.112 16.060 21.199 21.647 29.439 28.925 40.496 12 13 4.818 5.492 5.350 6.153 6.580 7.699 40.037 54.451 5.926 6.886 7.988 9.266 7.288 8.599 8.064 8.916 19.343 24.759 27.983 36.937 56.694 79.372 9.596 10.699 16.386 7.076 8.137 9.007 48.757 64.359 14 6.261 7.138 10.147 11.974 11.420 13.590 12.839 15.407 20.319 25.196 31.961 40.565 74.053 111.120 155.568 15 10.539 100.712 16 17 8.137 9.276 9.358 10.761 10.748 12.468 136.969 217.795 304.914 186.278 12.330 14.129 16.172 19.244 18.488 22.186 31.243 38.741 51.923 66.461 84.954 112.139 14.426 16.879 16.672 19.673 23.214 18 10.575 12.375 14.463 16.777 22.901 26.623 31.948 48.039 148.023 85.071 108.890 195.391 253.338 426.879 19 12.056 14.232 19.748 27.252 59.568 344.540 597.630 13.743 23.212 32.429 65.032 139.380 257.916 20 24 16.367 28.625 19.461 35.236 23.106 43.297 27.393 53.109 38.338 79.497 468.574 374.144 783.023 1,603.00 478.905 1,033.59 2,180.08 4,499.88 634.820 1,645.50 4,142.07 10,143.0 24,201.4 66,520.8 219,562 700,038 73.864 174.631 836.683 3,214.20 95.396 237.376 216.542 25 30 26.462 50.950 32.919 66.212 40.874 85.850 50.658 111.065 62.669 143.371 77.388 184.675 40 700.233 1,083.66 1,670.70 60 2,595.92 4,384.00 7,370.20 12,335.4 20,555.1 34,105.0 56,347.5 402,996 750.378 1,051.67 2,566.22 3,927.36 5,988.91 188.884 267.864 378.721 533.869 1,469.77 5,455.91 19,426.7 9,100.44 46,890.4 229,350 50
Extracted text: ATABLE 9A.3 Depreciation Rates for MACRS Property Other than Real Property* Recovery Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52 1249 11.52 7.70 6.177 11.52 8.93 9.22 6.93 5.713 5.76 8.92 7.37 6.23 5.285 8.93 6.55 5.90 4.888 8 4.46 6.55 5.90 4.522 6.56 5.91 4.462 10 6.55 5.90 4.461 11 3.28 5.91 4.462 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 4.462 18 4.461 19 4.462 20 4.461 21 2231 67