Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A firm is considering a project which will require the purchase of $2.7 million in new machine. The equipment belongs in a 20% CCA class.
A firm is considering a project which will require the purchase of $2.7 million in new machine. The equipment belongs in a 20% CCA class. The firm expects to sell the equipment at the end of the project for 30% of its original cost. Annual sales from this project are estimated at $2 million. Net working capital equal to 25% of sales will be required to support the project. All the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. What is the present value of the net working capital changes associated with the project? The project is expected to last 7 years. Select one: O a. SO O b. $144,087 O c. -$300,181 O d. $144,087 O e. $300,181 A firm is considering a project which will require the purchase of $2.7 million in new machine. The equipment belongs in a 20% CCA class. The firm expects to sell the equipment at the end of the project for 30% of its original cost. Annual sales from this project are estimated at $2 million. Net working capital equal to 25% of sales will be required to support the project. All the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. What is the present value of the net working capital changes associated with the project? The project is expected to last 7 years. Select one: O a. SO O b. $144,087 O c. -$300,181 O d. $144,087 O e. $300,181
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