Adequate information: Expected sales in Year 1=7,100 units Expected sales in Year 2=7,900 units Expected sales in Year 3=9,200 units Expected sales in Year 4=6,100 units Selling price per unit=$305 Fixed costs per year = $375,000 Variable costs= 15% of sales Cost of equipment =$3,400,000 Scrap value= $310,000 Net working capital required= $225,000 Tax rate=23% Rate of return =13% To compute : New NPV in case the fixed asset qualifies for 100 percent bonus depreciation Introduction : Net present value is a technique to evaluate different investment proposals and select the best one. It is representing the difference between the present value of cash outflows and the present value of cash inflows.

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Chapter 6, Problem 29QAP

Summary Introduction

Adequate information:

Expected sales in Year 1=7,100 units

Expected sales in Year 2=7,900 units

Expected sales in Year 3=9,200 units

Expected sales in Year 4=6,100 units

Selling price per unit=$305

Fixed costs per year = $375,000

Variable costs= 15% of sales

Cost of equipment =$3,400,000

Scrap value= $310,000

Net working capital required= $225,000

Tax rate=23%

Rate of return=13%

To compute: New NPV in case the fixed asset qualifies for 100 percent bonus depreciation

Introduction: Net present value is a technique to evaluate different investment proposals and select the best one. It is representing the difference between the present value of cash outflows and the present value of cash inflows.

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