Question
Bottoms Up diaper service is considering the purchase of a new industrial washer. it can purchase the washer for $3600 and sell its old washer
Bottoms Up diaper service is considering the purchase of a new industrial washer. it can purchase the washer for $3600 and sell its old washer for $900. The new washer will last for 6 years and save $1100 a year in expenses. the opportunity cost of capital is 20% and the firm's tax rate is 21%.
a. if the firm uses straight-line depreciationover a 6 year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated .
b. What is the project NPV?
c. What is the NPV if the firm investment is entitled to immediate 100% bonus depreciation?
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