Question
A&Y Inc. considers a 7-year project that requires $500,000 of investment in new machinery and $40,000 in NWC (that will stay constant for the entire
A&Y Inc. considers a 7-year project that requires $500,000 of investment in new machinery and $40,000 in NWC (that will stay constant for the entire life of the project). At the end of the project the equipment will be sold for a salvage value of $70,000. The cost of capital is 10%, the equipment belongs to a CCA class with d=40%, and the corporate tax rate is 30%
Problem 20: Prof Reynolds was able to use his industry connections to get a 3% discount on the equipment (i.e., it can be purchased for $485,000 instead of $500,000). By how much will this increase the projects NPV?
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