Question
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,200 and sell its old washer
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,200 and sell its old washer for $2,500. The new washer will last for 6 years and save $2,500 a year in expenses. The opportunity cost of capital is 15%, and the firms tax rate is 21%.
A. If the firm uses straight-line depreciation over a 6 year life, what are the cash flow of the project in years 0 to 6? The new washer will have a zero salvage value after 6 years, and the old washer is fully depreciated.(Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
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 | |
A. Annual operating cash flow in years 1 to 6 | |
B.NPV C.NPV |
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