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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Question
Transcribed Image Text:If Lew's Steel Forms purchases $632,000 of new equipment, they can lower annual operating costs by $300,000. The
equipment will be depreciated straight-line to a zero book value over its 3-year life. Ignore bonus depreciation. At the end of the
three years, the equipment will be sold for an estimated $25,000. The equipment will require the company to hold an extra
$65,000 of inventory over the 3-year period. What is the NPV if the discount rate is 13 percent and the tax rate is 21 percent?
NPV = 36491.30 X
Attempt # 1: 0/1 (Score: 0/1)
Allowed attempts: 3
X Incorrect
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