Question
Information: Dorothy & George Company is planning to acquire a new machine at a total cost of $35,000. The machines estimated life is 6 years
Information: Dorothy & George Company is planning to acquire a new machine at a total cost of $35,000. The machines estimated life is 6 years and its estimated salvage value is $800. The company estimates that annual cash savings from using this machine will be $9,100. The companys after-tax cost of capital is 10% and its income tax rate is 40%. The company uses straight-line depreciation (non-MACRS-based).
Question: Assume that the net after-tax annual cash inflow of this investment is $5,000; what is the net present value (NPV) of this investment?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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