Plan buy now

Year 0 1 2
Net Capital Spending
(1,820,000)
New machine
Depreciation Expense 109,200 109,200
 Cost saved (Old
machine: overtime pay-
33,669 33,669
18199 and maintenance
costs-15470)
AMC New machine 3,640.00 3,822.00
Tax saved on old
machine (tax rate *
overtime+maintenance+ 26,084.91 26,084.91
depreciation-72800 in 3
years)
Tax saved on new
machine (tax rate * 27,645.80 27,690.39
AMC+depreciation)
Net cash flow (1,820,000.00) 140,789.90 140,652.49

Tax Rate 24.50%

WACC 11.10%
Net Present Value (626,109.97)
Internal Rate of Return 0.03
 3 4 5 6 7 8

109,200 182,000 182,000 182,000 182,000 182,000

33,669 33,669 33,669 33,669 33,669 33,669

4,013.10 4,213.76 4,424.44 4,645.66 4,877.95 5,121.85

26,084.91 8,248.91 8,248.91 8,248.91 8,248.91 8,248.91

27,737.21 45,622.37 45,673.99 45,728.19 45,785.10 45,844.85

140,508.20 248,828.71 248,669.64 248,502.62 248,327.24 248,143.10

 9 10 11 12 13

182,000 182,000 - - -

33,669 33,669 33,669 33,669 33,669

5,377.94 5,646.83 5,929.18 6,225.64 6,536.92

8,248.91 8,248.91 8,248.91 8,248.91 8,248.91

45,907.59 45,973.47 1,452.65 1,525.28 1,601.54

247,949.75 247,746.73 20,943.57 20,719.74 20,484.72

Plan buy 3 years later
Year -2 -1 0 1
Net Capital Spending New machine -2106878
Depreciation Expense 72800 72800 72800 210687.8
 Cost saved (Old machine: overtime
pay-18199 and maintenance costs-
15470) 33669 33669 33669 33669
AMC New machine 3640.00
Tax saved on old machine (tax rate *
overtime+maintenance) 26084.91 26084.91 26084.91 8248.91
Tax saved on new machine (tax rate *
AMC+depreciation) 45481.80
Net cash flow 80384.10 80384.10 -2026493.91 277949.70

Tax Rate 24.50%

WACC 11.10%
Net Present ($336,196.86)
Internal Rate 0.08
 2 3 4 5 6 7 8 9

210687.8 210687.8 210687.8 210687.8 210687.8 210687.8 210687.8 210687.8

33669 33669 33669 33669 33669 33669 33669 33669

3822.00 4013.10 4213.76 4424.44 4645.66 4877.95 5121.85 5377.94

8248.91 8248.91 8248.91 8248.91 8248.91 8248.91 8248.91 8248.91

45526.39 45573.21 45622.37 45673.99 45728.19 45785.10 45844.85 45907.59

277812.29 277668.00 277516.51 277357.44 277190.42 277015.04 276830.90 276637.55
 10

210687.8

33669
5646.83

8248.91

45973.47
276434.53