Tripp Industries is considering buying a new recycling system. The new recycling system would be purchased today for $7,760.00. It would be depreciatedstraight-line to $1,060.00 over 2 years. In 2 years, the recycling system would be sold and the after-tax cash flow from capital spending in year 2 would be$1,290.00. The recycling system is expected to reduce costs by $2,810.00 in year 1 and by $8,610.00 in year 2. If the tax rate is 59.00 % and the cost of capital is7.16%, what is the net present value of the new recycling system project?$426.49 (plus or minus $10)$331.08 (plus or minus $10)$1,078.26 (plus or minus $10)-$2,115.95 (plus or minus $10)None of the above is within $10 of the correct answer

Part 2: Explanation:Step 1: Calculate the annual depreciation expense.The initial cost of the…

Answered: Tripp Industries is considering buying…

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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Shelly's Boutique is evaluating a project which will increase annual sales by $70,000 and annual costs by $40,000. The project will initially require $100,000 in fixed assets which will be depreciated straight-line to a zero book value over the 5-year life of the project. The applicable tax rate is 34 percent. What is the operating cash flow for this project?
Vijay shiyal
Tripp Industries is considering buying a new recycling system. The new recycling system would be purchased today for $7,700.00. It would be depreciated straight-line to $1,020.00 over 2 years. In 2 years, the recycling system would be sold and the after-tax cash flow from capital spending in year 2 would be $1,270.00. The recycling system is expected to reduce costs by $2,730.00 in year 1 and by $8,630.00 in year 2. If the tax rate is 52.00% and the cost of capital is 7.73%, what is the net present value of the new recycling system project? $106.43 (plus or minus $10) $191.35 (plus or minus $10) $1,288.60 (plus or minus $10) -$2,245.85 (plus or minus $10) None of the above is within $10 of the correct answer
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