XYZ corp. is considering investing in a new machine. The new machine cost will $ 8,000 installed. Depreciation expense on the new machine will be $ 1,200 per year for the next five years. At the end of the fifth year XYZ expects to sell the machine for $3000. XYZ will also sell its old machine today that has a book value of $4000 for $4000. The old machine has depreciation expense of $800 per year and zero salvage value. Additionally, XYZ Corp expects that the new machine will increase its EBIT by $3000 in each of the next five years. Assuming that XYZ's marginal tax rate is 21% and the projects cost of capital is 12%. What is the projects NPV? Round your final answer to two decimals.
XYZ corp. is considering investing in a new machine. The new machine cost will $ 8,000 installed. Depreciation expense on the new machine will be $ 1,200 per year for the next five years. At the end of the fifth year XYZ expects to sell the machine for $3000. XYZ will also sell its old machine today that has a book value of $4000 for $4000. The old machine has depreciation expense of $800 per year and zero salvage value. Additionally, XYZ Corp expects that the new machine will increase its EBIT by $3000 in each of the next five years. Assuming that XYZ's marginal tax rate is 21% and the projects cost of capital is 12%. What is the projects NPV? Round your final answer to two decimals.
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
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Transcribed Image Text:XYZ corp. is considering investing in a new machine. The new machine cost will $ 8,000
installed. Depreciation expense on the new machine will be $ 1,200 per year for the next
five years. At the end of the fifth year XYZ expects to sell the machine for $3000.XYZ
will also sell its old machine today that has a book value of $4000 for $4000. The old
machine has depreciation expense of $800 per year and zero salvage value. Additionally,
XYZ Corp expects that the new machine will increase its EBIT by $3000 in each of the
next five years. Assuming that XYZ's marginal tax rate is 21% and the projects cost of
capital is 12%, What is the projects NPV? Round your final answer to two decimals.
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