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Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $495,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $87,000 at the end of the project in 5 years. Sales would be $331,000 per year, with annual fixed costs of $61,000 and variable costs equal to 36 percent of sales. The project would require an investment of $53,000 in NWC that would be returned at the end of the project. The tax rate is 24 percent and the required return is 9 percent. Calculate the NPV of this project.

Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $495,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $87,000 at the end of the project in 5 years. Sales would be $331,000 per year, with annual fixed costs of $61,000 and variable costs equal to 36 percent of sales. The project would require an investment of $53,000 in NWC that would be returned at the end of the project. The tax rate is 24 percent and the required return is 9 percent. Calculate the NPV of this project.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $495,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $87,000 at the end of the project in 5 years. Sales would be $331,000 per year, with annual fixed costs of $61,000 and variable costs equal to 36 percent of sales. The project would require an investment of $53,000 in NWC that would be returned at the end of the project. The tax rate is 24 percent and the required return is 9 percent. Calculate the NPV of this project.

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