QUESTION 9 A company is considering the purchase of a high-powered satellite dish. The dish has an invoice price of $40,000 and installation and testing costs of $8,000. The dish is expected to increase cash revenues by $14,000 per year and decrease cash operating expenses by $1,500 per year. The company will enter into a 3-year maintenance agreement with the vendor. The maintenance agreement calls for one payment of $1,800, payable when the new dish is purchased. The dish will be depreciated as a MACRS 5-year asset. If acquired, the dish would be sold in the middle of the third year of use. The estimated selling price at that time is $12,500. All cash flows are given in nominal amounts. The company's nominal discount rate is 8%. The company's tax rate is 20%. A. (8 points) Calculate the book value of this asset near the end of the 3rd year of use. Please show each year's depreciation expense. Assume this asset will be depreciated using the 5 year MACRS rates. Round answers to the nearest whole dollar. B.(16 points) Calculate the net present value of this equipment. Use the method illustrated in class (columns for each year). Place all outflows in parentheses. Round numbers to the nearest dollar. TT T Arial 3 (12pt) T-9 - E- 's Path:p Words:0 QUESTION 9 A company is considering the purchase of a high-powered satellite dish. The dish has an invoice price of $40,000 and installation and testing costs of $8,000. The dish is expected to increase cash revenues by $14,000 per year and decrease cash operating expenses by $1,500 per year. The company will enter into a 3-year maintenance agreement with the vendor. The maintenance agreement calls for one payment of $1,800, payable when the new dish is purchased. The dish will be depreciated as a MACRS 5-year asset. If acquired, the dish would be sold in the middle of the third year of use. The estimated selling price at that time is $12,500. All cash flows are given in nominal amounts. The company's nominal discount rate is 8%. The company's tax rate is 20%. A. (8 points) Calculate the book value of this asset near the end of the 3rd year of use. Please show each year's depreciation expense. Assume this asset will be depreciated using the 5 year MACRS rates. Round answers to the nearest whole dollar. B.(16 points) Calculate the net present value of this equipment. Use the method illustrated in class (columns for each year). Place all outflows in parentheses. Round numbers to the nearest dollar. TT T Arial 3 (12pt) T-9 - E- 's Path:p Words:0
