FITCO is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 is

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FITCO is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 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 $265,000, and it will have annual cash operating expenses of $83,000. The equipment will be sold for $85,000 after five years.

An inventory investment of $73,000 is required during the life of the investment. FITCO has a marginal tax rate of 28 percent, and its cost of capital is 10 percent. What is the project NPV?

a. $97,449.

b. $144,723.

c. $162,767.

d. $231,371.

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Fundamentals Of Corporate Finance

ISBN: 9781119795438

5th Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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