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Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,000 and sell its old washer
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,000 and sell its old washer for $2,000. The new washer will last for 6 years and save $1,500 a year in expenses. The opportunity cost of capital is 16%, 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 amount 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.) $ (4.420) 1,395 $ Annual operating cash flow in year 0 Annual operating cash flow in years 1 to 6 b. NPV c. NPV $ 720.16
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