Question
Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 17,000 dollars. It would be depreciated straight-line to 1,600
Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 17,000 dollars. It would be depreciated straight-line to 1,600 dollars over 2 years. In 2 years, the oven would be sold for an after-tax cash flow of 2,100 dollars. Without the new oven, costs are expected to be 11,500 dollars in 1 year and 17,500 in 2 years. With the new oven, costs are expected to be 300 dollars in 1 year and 14,600 in 2 years. If the tax rate is 50 percent and the cost of capital is 11.34 percent, what is the net present value of the new oven project?
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