A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. Suppose the new monitor requires us to increase net working capital by $47,200 when we buy it. 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 $
A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. Suppose the new monitor requires us to increase net working capital by $47,200 when we buy it. 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 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would
actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. Suppose
the new monitor requires us to increase net working capital by $47,200 when we buy it. 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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