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PROBLEM 8 C - 3 Income Taxes and Net Present Value Analysis [ LO 8 - 8 ] Lander Company has an opportunity to pursue
PROBLEM C Income Taxes and Net Present Value Analysis LO Lander Company has an opportunity to pursue a capital budgeting project with a fiveyear time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of equipment needed $ Working capital needed Overhaul of the equipment in two years $ $ Annual revenues and costs: Sales revenues $ Variable expenses $ Fixed outofpocket operating costs $ The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straightline depreciation for financial reporting and tax purposes. The company's tax rate is and its aftertax cost of capital is When the project concludes in five years the working capital will be released for investment elsewhere within the company. Required: Calculate the net present value of this investment opportunity.
PROBLEM C Income Taxes and Net Present Value Analysis LO
Lander Company has an opportunity to pursue a capital budgeting project with a fiveyear time horizon. After careful study, Lander estimated the following costs and revenues for the project:
Cost of equipment needed
$
Working capital needed
Overhaul of the equipment in two years
$
$
Annual revenues and costs:
Sales revenues
$
Variable expenses
$
Fixed outofpocket operating costs
$
The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straightline depreciation for financial reporting and tax purposes. The company's tax rate is and its aftertax cost of capital is When the project concludes in five years the working capital will be released for investment elsewhere within the company.
Required:
Calculate the net present value of this investment opportunity.
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