What is the NPV for the tool investment?

What is the value of the same interest rate swap to the party that receives floating and pays fixed?
January 4, 2018
Heathrow Airport Holdings currently charges airlines a uniform fee of £1,712.50 each time the runway is utilized. As a consultant to Heathrow Airport Holdings, devise a pricing plan that would enhance the company’s profitability.
January 4, 2018

What is the NPV for the tool investment?

The Miracle company is evaluating the purchase of a tool that falls under the 3-year asset life category for MACRS and is expected to a 4 year life. The tool will cost $700,000. If the tool is purchased, inventories and accounts payable will have to increase upon purchase by $50,000 and $10,000, respectively. With the additional flexibility from the manufacturing tool, sales are expected to increase by $600,000 the first year and not grow further while maintenance expenses will increase $300,000. Any net operating working capital will be recovered at the end of the project as well as the manufacturing tool can be sold for $50,000. Miracle co. has a 10% WACC and a 40% tax rate. What is the NPV for the tool investment?

 

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