The Seaboard Sail school is considering the purchase of new boats for $260,000. The firm's old sailboats have a sell value of $54,000. The boats are subject to a 15% CCA. This investment will generate additional Cash flows revenue $45,000 for 8 years after taxes through reduced fuel and maintenance expenses. Seaboard is in the 30% tax bracket and has a 9% cost of capital. Calculate the net present value of Seaboard's purchase and state whether or not the firm should buy the boats. 1. What is the net amount of the replacement 2. Calculate Present Value of After-tax Savings for the 8 years (Hint: you can calcuate the PV for all years all at once using PMT) 3. Calculate PV of Tax Shield (CCA) 4. Calculate the NPV by using amounts from above and in question details and indicate if they should buy the machine.

The Seaboard Sail school is considering the purchase of new boats for $260,000. The firm's old sailboats have a sell value of $54,000. The boats are subject to a 15% CCA. This investment will generate additional Cash flows revenue $45,000 for 8 years after taxes through reduced fuel and maintenance expenses. Seaboard is in the 30% tax bracket and has a 9% cost of capital. Calculate the net present value of Seaboard's purchase and state whether or not the firm should buy the boats. 1. What is the net amount of the replacement 2. Calculate Present Value of After-tax Savings for the 8 years (Hint: you can calcuate the PV for all years all at once using PMT) 3. Calculate PV of Tax Shield (CCA) 4. Calculate the NPV by using amounts from above and in question details and indicate if they should buy the machine.

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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