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2. Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3 year MACRS tax life. It would have
2. Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3 year | ||||||||||
MACRS tax life. It would have a pre tax salvage value at the end of year 3, when the project would be closed down | ||||||||||
as shown below. Revenues and other operating costs are expected to be constant over the project's 3 year life. | ||||||||||
What is the project's NPV? | ||||||||||
WACC | 10.00% | |||||||||
Net investment in fixxed assets (depreciable basis) | $70,000 | |||||||||
Required new working capital | $10,000 | |||||||||
MACRS deprec. Rate | .33 .45 .15 .07 | |||||||||
Increased sales revenues each year | $75,000 | |||||||||
Increased operating costs (excl. deprec.) each year | $30,000 | |||||||||
Expected salvage value | $5,000 | |||||||||
Tax rate | 35.00% |
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