Question
Cagliari Company is evaluating the purchase of new equipment. The price of the equipment, including shipping and installation, is $187,000. The equipment is fully depreciated
Cagliari Company is evaluating the purchase of new equipment. The price of the equipment, including shipping and installation, is $187,000. The equipment is fully depreciated at the time of purchase. The equipment would be sold after three years for $84,100. The equipment requires a $7,200 increase in net operating working capital. The new equipment would not affect the revenue, but the pretax labor cost would decline by $90,400.00 per year. The company tax rate is 29 percent. The Cagliari Company's beta coefficient is 1.13, the risk-free rate is 5.25 percent, and the market portfolio return is 10.75%. What is the NPV of the project? What is the MIRR of the project?
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