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. (Negative amounts should be indicated by a minus sign.)
b. What is project NPV? (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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
a. Annual operating cash flow in year 0
Annual operating cash flow in years 1 to 6
b. NPV
c. NPV
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