Am. 112. 8% discount rate, 4-year lifespan, straight-line depreciation, 21% tax rate. You pay $100K for a machine that reducescosts (increasing revenue) by $35K per year for 4 years. The machine then vanishes without a trace (or a haulaway cost).What's th NPV of the decision to buy the machine?

To calculate the Net Present Value (NPV) of the decision to buy the machine, we'll consider the…

Answered: 8% discount rate, 4-year lifespan,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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5. Does your company want to purchase this machine that will provide cost savings of $100,000 annually for its useful life (8 years)? The cost is $250,000; tax rate is 36% and discount rate is 14%. Compute straight-line depreciation for 8 years with zero salvage value. Calculate the cash flows and determine the NPV and IRR. Does your company want to buy this machine?
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ok nt ences A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would actually be worthless in five years. The new monitor would save $450,000 per year before taxes and operating costs. If we require a 15% return, what is the NPV of the purchase? Assume a tax rate of 40%. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
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8% discount rate, 4-year lifespan, straight-line depreciation, 21% tax rate. You pay $100K for a machine that reduces costs (increasing revenue) by $35K per year for 4 years. The machine then vanishes without a trace (or a haulaway cost). What's th NPV of the decision to buy the machine?