A new electronic process monitor costs $990,000. This cost could be depreciated at 30 percent per year(Class 10). The monitor would actually be worthless in five years. The new monitor would save $460,000per year before taxes and operating costs. If we require a 15 percent return, what is the NPV of thepurchase? Assume a tax rate of 40 percent. (Do not round intermediate calculations. Round the finalanswer to 2 decimal places.)NPV

NPV gives a clear picture of whether an investment is projected to make money or lose money. Whereas…

Answered: A new electronic process monitor costs…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(Ignore income taxes in this problem.) Your Company uses a discount rate of 10%. The company has an opportunity to buy a machine now for $38,000 that will yield cash inflows of $10,000 per year for each of the next five years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is: If the NPV is negative, enter your number with a – in front. Otherwise, just enter the number.

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