(Ignore income taxes in this problem.) Your Company's cost of capital is 4%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is six years. What is the net present value of purchasing theequipment?Cost of equipment$550,000Current lease payments$ 95,000Working capital needed$ 80,000Repair end of year 2$ 17,600Repair end of year 4$ 12,000Salvage value$125,000O $4,842O ($54,408)O $10.717$ 2,592O $ 3,400

We have to find out present value of all cost and present value of lease payment and find out net…

(Ignore income taxes in this problem.) Your Company's cost of capital is 4%, It is contemplating the purchase of equipment to replace equipment that it is currently le equipment? Cost of equipment $550,000 $ 95,000 $ 80,000 $ 17,600 $ 12,000 Current lease payments Working capital needed Repair end of year 2 Repair end of year 4 Salvage value $125,000 $4,842 O ($54,408) $10,717 O $2.592 O 3,400

(Ignore income taxes in this problem.) Your Company's cost of capital is 4%, It is contemplating the purchase of equipment to replace equipment that it is currently le equipment? Cost of equipment $550,000 $ 95,000 $ 80,000 $ 17,600 $ 12,000 Current lease payments Working capital needed Repair end of year 2 Repair end of year 4 Salvage value $125,000 $4,842 O ($54,408) $10,717 O $2.592 O 3,400

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

Section: Chapter Questions

Problem 1PS

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Question

(Ignore income taxes in this problem.) Your Company's cost of capital is 4%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is six years. What is the net present value of purchasing the
equipment?
Cost of equipment
$550,000
Current lease payments
$ 95,000
Working capital needed
$ 80,000
Repair end of year 2
$ 17,600
Repair end of year 4
$ 12,000
Salvage value
$125,000
O $4,842
O ($54,408)
O $10.717
$ 2,592
O $ 3,400

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