Confirming Pages PART SIX 12 Estimating Cash Flows B E On Capital Budgeting N Projects T viewpoints O N , Business Application J Personal Application…

WCX, Inc. is considering the replacement of its old stamping machine with a new one. The old machine was purchased 3 years ago for $62,000 and was expected to last for 8 years. The old machine has been depreciated using straight-line depreciation with an expected salvage value at the end of its life of $6,000. The new machine will cost $84,000 and would be considered a MACRS 3 year asset. The new machine would have a useful life of 5 years and then be sold for $8,000. The new stamping machine would result in increased revenues of $12,000 per year and would cost an additional $2,000 per year to operate. If you decide to purchase the new machine, the old machine could be sold today for $40,000. The company has a 6% cost of capital and is in the 40% tax bracket. Its Cost Recovery Policy specifies 4 years as its payback requirement. Using payback period, discounted payback period, NPV, IRR, and MIRR, determine if this is a good project or not.1.) Submit answer in excell2.) Explain the steps involved in the Capital Budgeting process.3.) Explain if this is a good project or not and why. Explain to the Board of Directors why.

Calculation of After Tax Salvage ValueOriginal cost price of the machineLess DepreciationBook value after 3 yearsMarket valueLoss on saleTax on LossAfter tax salvage value 62,000-21000…

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