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Teitelbaum Corp. plans to buy equipment costing $880,000. In connection with this transaction, old equipment having a book value of $140,000 will be sold for $210,000. Annual cash flow returns from this new investment are estimated at $370,000 before taxes. Depreciation on the new equipment will be $88,000 each year for the next 10 years. No salvage value is expected on this new equipment. No further depreciation can be taken on the old equipment that will be sold. The income tax rate is 30 percent.   Determine the NPV of the new investment using a discount rate of 20%: $ ______________

Teitelbaum Corp. plans to buy equipment costing $880,000. In connection with this transaction, old equipment having a book value of $140,000 will be sold for $210,000. Annual cash flow returns from this new investment are estimated at $370,000 before taxes. Depreciation on the new equipment will be $88,000 each year for the next 10 years. No salvage value is expected on this new equipment. No further depreciation can be taken on the old equipment that will be sold. The income tax rate is 30 percent.   Determine the NPV of the new investment using a discount rate of 20%: $ ______________

Essentials Of Investments
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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Teitelbaum Corp. plans to buy equipment costing $880,000. In connection with this transaction, old equipment having a book value of $140,000 will be sold for $210,000. Annual cash flow returns from this new investment are estimated at $370,000 before taxes. Depreciation on the new equipment will be $88,000 each year for the next 10 years. No salvage value is expected on this new equipment. No further depreciation can be taken on the old equipment that will be sold. The income tax rate is 30 percent.

 

Determine the NPV of the new investment using a discount rate of 20%: $ ______________

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