Question
Lutron, Inc. is making an equipment investment of $35,000 which will be depreciated straight line for 10 years down to a zero salvage value. For
Lutron, Inc. is making an equipment investment of $35,000 which will be depreciated straight line for 10 years down to a zero salvage value. For its 10-year life, the investment will generate annual sales of $15,000 and annual cash operating expenses of $3,000. Although the equipment is depreciated to a zero book value, it should sell for $5,000 in 10 years. The marginal income tax rate is 40% and the cost of capital is 12%. What is the annual net operating cash flow (after tax) of the investment?What is the NPV of the investment?(Enter your answer in dollars and cents).
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