Question
NPV and Bonus Depreciation [LO1] Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for
NPV and Bonus Depreciation [LO1] Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $425,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $25,000 at the end of the project in 5 years. Sales would be $275,000 per year, with annual fixed costs of $47,000 and variable costs equal to 35 percent of sales. The project would require an investment of $25,000 in NWC that would be returned at the end of the project. The tax rate is 22 percent and the required return is 9 percent. What is the projects NPV?
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