The net present value if the equipment were purchased is?

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
icon
Related questions
Question

JPIA Manufacturing has an investment opportunity to embark on a project where yearly revenues for five years are to be P400,000 and operating costs of P104,800. The equipment costs P850,000, and straight-line depreciation will be used for book and tax purposes. No salvage value is expected at the end of the project’s life. The company has a 40 percent marginal tax rate and a 10 percent cost of capital. The equipment manufacturer has offered a delayed payment plan of P560,500 per year at the end of the first and second years. There will be no changes in working capital. The present value of annuity of 1 for 5 periods is 3.7908 at 10 percent. The present values of 1 end of each period at 10 percent are: Period 1  0.9091;Period 2   0.8264;Period 3   0.7513;Period 4   0.6830;Period 5   0.6209. The net present value if the equipment were purchased is?

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education