Johnson Products Is Considering Purchasing A New Milling Machine That Costs 100 1

Johnson Products is considering purchasing a new milling machine that costs$100,000. The machine’s installation and shipping costs will total $2,500. If accepted,the milling machine project will require an initial net working capital investment of$20,000. Johnson plans to depreciate the machine on a straight-line basis over aperiod of 8 years. About a year ago, Johnson paid $10,000 to a consulting firm toconduct a feasibility study of the new milling machine. Johnson’s marginal tax rateis 40 percent.•a. Calculate the project’s net investment (NINV).b. Calculate the annual straight-line depreciation for the project.c. Calculate MACRS depreciation assuming this is a 7-year class asset (Appendix 9A).Recovery Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%2 44.45 32.00 24.49 18.00 9.50 7.2193 14.81 19.20 17.49 14.40 8.55 6.6774 7.41 11.52 12.49 11.52 7.70 6.1775 11.52 8.93 9.22 6.93 5.7136 5.76 8.92 7.37 6.23 5.2857 8.93 6.55 5.90 4.8888 4.46 6.55 5.90 4.5229 6.56 5.91 4.46210 6.55 5.90 4.46111 3.28 5.91 4.46212 5.90 4.461

Question: Johnson Products is considering purchasing a new milling machine that costs$100,000. The machine’s installation and shipping costs will total $2,500. If accepted,the milling machine…

 

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