please I need answer on excel spread sheet and solution step by step.thank you.please see the attachment12-5-Huang Industries is considering a proposed project whose estimated
NPV is $12 million. This estimate assumes that economic conditions will be
However, the CFO realizes that conditions could be better or worse, so she
scenario analysis and obtained these results:
Economic Scenario Probability of Outcome NPV
Recession 0.05 ($70 million)
Below average 0.20 (25 million)
Average 0.50 12 million
Above average 0.20 20 million
Boom 0.05 30 million
Calculate the project’s expected NPV, standard deviation, and coe±cient of
12-7 - You must evaluate a proposal to buy a new milling machine. The
base price is $108,000, and shipping and installation costs would add
The machine falls into the MACRS 3-year class, and it would be sold after 3
$65,000. The applicable depreciation rates are 33, 45, 15, and 7 percent as
Appendix 12A. The machine would require a $5,500 increase in working
(increased inventory less increased accounts payable). There would be no
revenues, but pre-tax labor costs would decline by $44,000 per year. The
rate is 35 percent, and the WACC is 12 percent. Also, the ³rm spent $5,000
investigating the feasibility of using the machine.
a. How should the $5,000 spent last year be handled?
b. What is the net cost of the machine for capital budgeting purposes, that is,
the Year 0
project cash ´ow?
c. What are the net operating cash ´ows during Years 1, 2, and 3?
d. What is the terminal year cash ´ow?
e. Should the machine be purchased? Explain your answer.
This question was answered on: May 23, 2022
This attachment is locked
Our expert Writers have done this assignment before, you can reorder for a fresh, original and plagiarism-free copy and it will be redone much faster (Deadline assured. Flexible pricing. TurnItIn Report provided)
May 23, 2022EXPERT
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions: