Your company is considering the purchase of new equipment. The equipment costs R350 000, and an additional R110 000 is needed to install it. The equipment will be depreciated straight-line to zero over a five-year life. The equipment will generate additional annual revenues of R265 000, and it will have annual cash operating expenses of R83 000. The equipment will be sold for R85 000 after five years. An inventory investment of R73 000 is required during the life of the investment. The company is in the 40 percent tax bracket, and its cost of capital is 10 percent. Required: What is the project NPV?
Your company is considering the purchase of new equipment. The equipment costs R350 000, and an additional R110 000 is needed to install it. The equipment will be depreciated straight-line to zero over a five-year life. The equipment will generate additional annual revenues of R265 000, and it will have annual cash operating expenses of R83 000. The equipment will be sold for R85 000 after five years. An inventory investment of R73 000 is required during the life of the investment. The company is in the 40 percent tax bracket, and its cost of capital is 10 percent. Required: What is the project NPV?
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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Your company is considering the purchase of new equipment. The equipment costs R350 000, and an additional R110 000 is needed to install it. The equipment will be
Required:
What is the project NPV?
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VIEWStep 5: computation of Net proceeds from sale of equipment at the end of year 5.
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