Question
XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $50,000.00. It would be depreciated straight-line to
XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $50,000.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $12,700.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $87,400.00 in 1 year and $67,300.00 in 2 years. If the tax rate is 49.70% and the cost of capital is 8.80%, what is the net present value of the new interception system project?
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
13th edition
978-1-119-4110, 1119411483, 9781119411017, 978-1119411482
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