Cullumber Lumber, Inc; is considering purchasing a new wood saw that costs $65000. 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 $4500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Cullumber’s tax rate is 26 percent, and it’s opportunity cost of capital is 13.10 percent. What is the project’s NPV
Cullumber Lumber, Inc; is considering purchasing a new wood saw that costs $65000. 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 $4500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Cullumber’s tax rate is 26 percent, and it’s opportunity cost of capital is 13.10 percent. What is the project’s NPV
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 8P
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Cullumber Lumber, Inc; is considering purchasing a new wood saw that costs $65000. 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 $4500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Cullumber’s tax rate is 26 percent, and it’s opportunity cost of capital is 13.10 percent. What is the project’s NPV?
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