Question
XYZ is considering buying a new sterilization system. The new sterilization system would be purchased today for $88,000. It would be depreciated straight-line to $0
XYZ is considering buying a new sterilization system. The new sterilization system would be purchased today for $88,000. It would be depreciated straight-line to $0 over 2 years. In 2 years, the sterilization system would be sold for an after-tax cash flow of $7,000. Without the sterilization system, costs are expected to be $110,000 in 1 year and $150,000 in 2 years. With the sterilization system, costs are expected to be $76,000 in 1 year and $52,000 in 2 years. If the tax rate is 50% and the cost of capital is 5.86%, what is the net present value of the new sterilization system project?
| a. | $8,998 (plus or minus $50) | |
| b. | $12,198 (plus or minus $50) | |
| c. | $15,321 (plus or minus $50) | |
| d. | $18,445 (plus or minus $50) | |
| e. | None of the above is within $50 of the correct answer |
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Cost Management Accounting And Control
Authors: Don R. Hansen, Maryanne M. Mowen
3rd Edition
0324002327, 978-0324002324
