If Lew's Steel Forms purchases $500,000 of new equipment, they can lower annual operating costs by $216,000. The equipment will be depreciated straight-line to a zero book value over its 5-year life. At the end of the three years, the equipment will be sold for an estimated $180,000. The equipment will no change in working capital. What is the NPV (in whole dollar) if the discount rate is 14 percent and the tax rate is 25 percent? {Hint: Use the method discussed in one of the special case.}

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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If Lew's Steel Forms purchases $500,000 of new equipment, they can lower annual operating costs by $216,000. The equipment will be depreciated straight-line to a zero book value over its 5-year life. At the end of three years, the equipment will be sold for an estimated $180,000. The equipment will no change in working capital. What is the NPV (in whole dollar) if the discount rate is 14 percent and the tax rate is 25 percent? {Hint: Use the method discussed in one of the special case.}
Transcribed Image Text:If Lew's Steel Forms purchases $500,000 of new equipment, they can lower annual operating costs by $216,000. The equipment will be depreciated straight-line to a zero book value over its 5-year life. At the end of three years, the equipment will be sold for an estimated $180,000. The equipment will no change in working capital. What is the NPV (in whole dollar) if the discount rate is 14 percent and the tax rate is 25 percent? {Hint: Use the method discussed in one of the special case.}
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