Riverton Silver is considering buying a new extraction system. The new extraction system would be purchased today for $56,300.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the extraction system would be sold for an after-tax cash flow of $3,060.00. Without the extraction system, costs are expected to be $97,800.00 in 1 year and $124,000.00 in 2 years. With the extraction system, costs are expected to be $75,000.00 in 1 year and $36,700.00 in 2 years. If the tax rate is 48.00% and the cost of capital is 18.71%, what is the net present value of the new extraction system project? -$1,764.29 (plus or minus $10) $9,043.41 (plus or minus $10) -$749.34 (plus or minus $10) -$16,928.65 (plus or minus $10) None of the above is within $10 of the correct answer
Riverton Silver is considering buying a new extraction system. The new extraction system would be purchased today for $56,300.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the extraction system would be sold for an after-tax cash flow of $3,060.00. Without the extraction system, costs are expected to be $97,800.00 in 1 year and $124,000.00 in 2 years. With the extraction system, costs are expected to be $75,000.00 in 1 year and $36,700.00 in 2 years. If the tax rate is 48.00% and the cost of capital is 18.71%, what is the net present value of the new extraction system project? -$1,764.29 (plus or minus $10) $9,043.41 (plus or minus $10) -$749.34 (plus or minus $10) -$16,928.65 (plus or minus $10) None of the above is within $10 of the correct answer
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
Related questions
Question

Transcribed Image Text:Riverton Silver is considering buying a new extraction system. The new extraction system would be purchased today for $56,300.00. It would be depreciated
straight-line to $0 over 2 years. In 2 years, the extraction system would be sold for an after-tax cash flow of $3,060.00. Without the extraction system, costs are
expected to be $97,800.00 in 1 year and $124,000.00 in 2 years. With the extraction system, costs are expected to be $75,000.00 in 1 year and $36,700.00 in 2
years. If the tax rate is 48.00% and the cost of capital is 18.71%, what is the net present value of the new extraction system project?
-$1,764.29 (plus or minus $10)
$9,043.41 (plus or minus $10)
-$749.34 (plus or minus $10)
-$16,928.65 (plus or minus $10)
None of the above is within $10 of the correct answer
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