Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 330,000 dollars today. The equipment would be depreciated straight-line to 40,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 54.000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 269,000 dollars and relevant costs are expected to be 72,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 6.85 percent. What is the NPV of the project? Number What is the NPV of project A? The project would require an initial investment in equipment of 35,000 dollars and would last for either 3 years or 4 years (the date when the project ends will not be known until it happens and that will be when the equipment stops working in either 3 years from today or 4 years from today). Annual operating cash flows of 12,950 dollars per year are expected each year until the project ends in either 3 years or 4 years. In 1 year, the project is expected to have an after-tax terminal value of 27,543 dollars. The cost of capital for this project is 11.5 percent. Number Oxygen Optimization is considering buying a new purification system. The new system would be purchased today for 14,000 dollars. It would be depreciated straight-line to 1.200 dollars over 2 years. In 2 years, the system would be sold and the after-tax cash flow from capital spending in year 2 would be 2,100 dollars. The system is expected to reduce costs by 5,300 dollars in year 1 and by 12,200 dolars in year 2. If the tax rate is 50 percent and the cost of capital is 11.39 percent, what is the net present value of the new purification system project? Number Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 330,000 dollars today. The equipment would be depreciated straight-line to 40,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 54,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 269,000 dollars and relevant costs are expected to be 72,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 6.85 percent. What is the NPV of the project? Number What is the NPV of project A? The project would require an initial investment in equipment of 35,000 dollars and would last for elther 3 years or 4 years (the date when the project ends will not be known until it happens and that will be when the equipment stops working in either 3 years from today or 4 years from today). Annual operating cash flows of 12,950 dollars per year are expected each year until the project ends in either 3 years or 4 years. In 1 year, the project is expected to have an after-tax terminal value of 27,543 dollars. The cost of capital for this project is 11.5 percent. Number Oxygen Optimization is considering buying a new purification system. The new system would be purchased today for 14,000 dollars. It would be depreciated straight-line to 1,200 dollars over 2 years. In 2 years, the system would be sold and the after-tax cash flow from capital spending in year 2 would be 2,100 dollars. The system is expected to reduce costs by 5,300 dollars in year 1 and by 12,200 dollars in year 2. If the tax rate is 50 percent and the cost of capital is 11.39 percent, what is the net present value of the new purification system project? Number
