Crane Lumber, Inc., is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,700 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax rate is 26 percent, and its opportunity cost of capital is 17.60 percent.
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,700 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax rate is 26 percent, and its opportunity cost of capital is 17.60 percent.
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
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Crane Lumber, Inc., is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,700 at the end of its five-year life and will be
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