will save $370,940 annually in operating costs before taxes in those five years. Assume a tax rate of 32.73%. Using a required return of 13.67%, what is the NPV of the machine purchase? Options $210,082 $215,760 $221,437 $227,11

will save $370,940 annually in operating costs before taxes in those five years. Assume a tax rate of 32.73%. Using a required return of 13.67%, what is the NPV of the machine purchase? Options $210,082 $215,760 $221,437 $227,11

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A new machine costs $798,410 and falls in a 26.50% CCA class. The machine will have zero value after 5 years of use but will save $370,940 annually in operating costs before taxes in those five years. Assume a tax rate of 32.73%. Using a required return of 13.67%, what is the NPV of the machine purchase?

Options

$210,082

$215,760

$221,437

$227,115

$232,793

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