Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

7. XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $50,000.00. It would be depreciated straight-line

7. XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $50,000.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the system would be
sold for an after-tax cash flow of $14,000.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $75,300.00 in 1 year and $68,600.00
in 2 years. If the tax rate is 46.90% and the cost of capital is 8.70%, what is the net present value of the new interception system project?
O $12412.55 (plus or minus $50)
O $8735.66 (plus or minus $50)
O S13163.88 (plus or minus $50)
O $10028.45 (plus or minus $50)
O None of the above is within $50 of the correct answer

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Corporate Finance A Focused Approach

Authors: Kenneth Kim, Suk Kim

3rd Edition

9811207119, 9789811207112

More Books

Students also viewed these Finance questions