Elder, Inc. is considering the purchase of a new air-handling system that will have no effect on revenues but will save $50,000 in energy costs each year it is used.  The system costs $120,000 and will be depreciated on a straight-line basis to $0 over 4 years.  The system can be sold after six years for $25,000.  If the Tax Rate is 20% and the opportunity cost of capital is 13%, what is the project’s Net Present Value (rounded to the nearest dollar

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
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Elder, Inc. is considering the purchase of a new air-handling system that will have no effect on revenues but will save $50,000 in energy costs each year it is used.  The system costs $120,000 and will be depreciated on a straight-line basis to $0 over 4 years.  The system can be sold after six years for $25,000.  If the Tax Rate is 20% and the opportunity cost of capital is 13%, what is the project’s Net Present Value (rounded to the nearest dollar)?

 

Multiple Choice
  •  

    $67,355

  •  

    $66,134

  •  
    None of the above
  •  

    $72,158

  •  

    $69,757

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