epreciated (straight-line to a salvage value of $120,000 in 10 years. The extra oven would increase annual revenues by $120,000 and annual operating expenses by $90,000. Barbarian’s marginal tax rate is 25%. This should all be done in excel. What would be
epreciated (straight-line to a salvage value of $120,000 in 10 years. The extra oven would increase annual revenues by $120,000 and annual operating expenses by $90,000. Barbarian’s marginal tax rate is 25%. This should all be done in excel. What would be
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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- Barbarian Pizza is analyzing the prospect of purchasing an additional fire brick oven. The oven costs $200,000 and would be
depreciated (straight-line to a salvage value of $120,000 in 10 years. The extra oven would increase annual revenues by $120,000 and annual operating expenses by $90,000. Barbarian’s marginal tax rate is 25%. This should all be done in excel.
What would be the initial, operating, and terminalcash flows generated by the new oven?
b. What is the payback period for the additional oven?
c. Barbarian Pizza’s RRR is 12%. What is theNPV of the additional oven?
d. What is theIRR of the additional oven?
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