Eggz, Incorporated, is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $480,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $78,000 at the end of the project in five years. Sales would be $362,000 per year, with annual fixed costs of $58,000 and variable costs equal to 39 percent of sales. The project would require an investment of $47,000 in NWC that would be returned at the end of the project. The tax rate is 21 percent and the required return is 12 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
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Eggz, Incorporated, is considering the purchase of new equipment that will allow the
company to collect loose hen feathers for sale. The equipment will cost $480,000 and
will be eligible for 100 percent bonus depreciation. The equipment can be sold for
$78,000 at the end of the project in five years. Sales would be $362,000 per year, with
annual fixed costs of $58,000 and variable costs equal to 39 percent of sales. The
project would require an investment of $47,000 in NWC that would be returned at the
end of the project. The tax rate is 21 percent and the required return is 12
percent. Calculate the NPV of this project. (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
NPV
Transcribed Image Text:Eggz, Incorporated, is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $480,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $78,000 at the end of the project in five years. Sales would be $362,000 per year, with annual fixed costs of $58,000 and variable costs equal to 39 percent of sales. The project would require an investment of $47,000 in NWC that would be returned at the end of the project. The tax rate is 21 percent and the required return is 12 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
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