Question
The Cornchopper Company is considering the purchase of a new harvester. The new harvester is not expected to affect revenue, but operating expenses will be
The Cornchopper Company is considering the purchase of a new harvester. |
The new harvester is not expected to affect revenue, but operating expenses will be reduced by $14,600 per year for 10 years. |
The old harvester is now 5 years old, with 10 years of its scheduled life remaining. It was originally purchased for $91,000 and has been depreciated by the straight-line method. |
The old harvester can be sold for $22,600 today. |
The new harvester will be depreciated by the straight-line method over its 10-year life. |
The corporate tax rate is 21 percent. |
The firms required rate of return is 14 percent. |
The initial investment, the proceeds from selling the old harvester, and any resulting tax effects occur immediately. |
All other cash flows occur at year-end. |
The market value of each harvester at the end of its economic life is zero. |
Determine the break-even purchase price in terms of present value of the harvester. This break-even purchase price is the price at which the projects NPV is zero. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
***note: answer is not 91309.20
Please get it right, thanks!
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