Steamboat Springs Furniture, Inc., is considering purchasing a new finishing lathe that costs $59,655.00. The lathe will generate revenues of $97,512.00 per year for five years. The cost of materials and labor needed to generate these revenues will total $49,525.00 per year, and other cash expenses will be $10.985.00 per year. The machine is expected to sell for $9.536.00 at the end of its five-year life and will be depreciated on a straight-ine basis over five years to zero. Steamboat Springs marginal tax rate is 38.00 percent, and its cost of capital is 14.00 percent. What is the NPV of the project?

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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Steamboat Springs Furniture, Inc., is considering purchasing a new finishing lathe that costs $59,655.00. The lathe will generate revenues of $97,512.00 per year for five years. The
cost of materials and labor needed to generate these revenues will total $49,525.00 per year, and other cash expenses will be $10,985.00 per year. The machine is expected to sell for
$9,536.00 at the end of its five-year life and will be depreciated on a straight-ine basis over five years to zero. Steamboat Springs marginal tax rate is 38.00 percent, and its cost of
capital is 14.00 percent.
What is the NPV of the project?
Transcribed Image Text:Steamboat Springs Furniture, Inc., is considering purchasing a new finishing lathe that costs $59,655.00. The lathe will generate revenues of $97,512.00 per year for five years. The cost of materials and labor needed to generate these revenues will total $49,525.00 per year, and other cash expenses will be $10,985.00 per year. The machine is expected to sell for $9,536.00 at the end of its five-year life and will be depreciated on a straight-ine basis over five years to zero. Steamboat Springs marginal tax rate is 38.00 percent, and its cost of capital is 14.00 percent. What is the NPV of the project?
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