Question
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $9,000 and sell its old washer
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $9,000 and sell its old washer for $2.200. The new washer will last for 6 years and save $2,700 a year in expenses. The opportunity cost of capital is 19%, and the firm's tax rate is 21%.
a. If the firm uses straight-line depreciation over 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
Note: Negative amounts should be indicated by a minus sign.
b. What is project NPV?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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