Your firm is considering launching a new operation. The firm's marginal income tax rate is 18%. The corporation needs a return of 11% on new investment proiecrs Engineering estimates that the machinery needed for the operation will cost $3,000,000. These assets will be depreciated over five years by the straight- line method down to a value of zero. The operating life of the equipment is also five years. At the end of this time you guess that the machinery can be sold for scrap for $200,000. Any capital gains or losses associated with the resell will be treated at the firm's marginal tax rate. The marketing department estimates that annual sales will be around $1,800,000 per year. The accounting department estimates that annual fixed costs will be $275,000, and the variable costs are about 35% of sales. Calculate the net present value of this operation. $1,373,500 $188,200 $208.902 0-$190,255 0-$185,081
Your firm is considering launching a new operation. The firm's marginal income tax rate is 18%. The corporation needs a return of 11% on new investment proiecrs Engineering estimates that the machinery needed for the operation will cost $3,000,000. These assets will be depreciated over five years by the straight- line method down to a value of zero. The operating life of the equipment is also five years. At the end of this time you guess that the machinery can be sold for scrap for $200,000. Any capital gains or losses associated with the resell will be treated at the firm's marginal tax rate. The marketing department estimates that annual sales will be around $1,800,000 per year. The accounting department estimates that annual fixed costs will be $275,000, and the variable costs are about 35% of sales. Calculate the net present value of this operation. $1,373,500 $188,200 $208.902 0-$190,255 0-$185,081
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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Question
9
Transcribed Image Text:Your firm is considering launching a new operation.
The firm's marginal income tax rate is 18%. The
corporation needs a return of 11% on
new investment proiecrs
Engineering estimates that the machinery needed
for the operation will cost $3,000,000. These assets
will be depreciated over five years by the straight-
line method down to a value of zero. The operating
life of the equipment is also five years. At the end of
this time you guess that the machinery can be sold
for scrap for $200,000. Any capital gains or losses
associated with the resell will be treated at the
firm's marginal tax rate.
The marketing department estimates that annual
sales will be around $1,800,000 per year. The
accounting department estimates that annual fixed
costs will be $275,000, and the variable costs are
about 35% of sales.
Calculate the net present value of this operation.
o $1,373,500
O $188,200
• $208.902
0-$190,255
0-$185,081
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