Question
23. The cost of a particular machine is $110,000. It has a useful life of 7 years. It saves us $15,000 annually in labor costs.
23. The cost of a particular machine is $110,000. It has a useful life of 7 years. It saves us $15,000 annually in labor costs. We estimate a salvage value of $8,000. Our cost of capital (discount rate) is 8%. Based on these facts, use your BA II Plus calculator to calculate the machines NPV (Net Present Value). On this problem, use ANNUAL COMPOUNDING (Thus, set your P/Y = 1). Round only your answer (the NPV of the machine) to the nearest dollar amount. Do not round any other amount in the problem.
A. $(27,237) - a negative number | ||
B. $(2,620) a negative number | ||
C. $2,620 | ||
D. $82,763 | ||
E. $96,110 | ||
$112,620 |
24. A corporation borrows $1,000,000 at a 10% ANNUAL rate of interest. The firm has a 40 percent marginal tax rate. What is the true yearly, AFTER-TAX cost of this debt (rounded to the nearest $1 if necessary)?
A. Zero (because interest expense is deductible) | ||
B. $40,000 | ||
C. $60,000 | ||
D. $100,000 | ||
E. $166,667 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started