Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Year 0 Year 1 475000 - 175000 - 100,000 200000 - 40000 Year 2 Year 3 475000 475000 - 175000 - 175000 - 100,000 -
Year 0 Year 1 475000 - 175000 - 100,000 200000 - 40000 Year 2 Year 3 475000 475000 - 175000 - 175000 - 100,000 - 100,000 200000 200000 - 40000 - 40000 Revenues - Cost of Goods Sold - Depreciation =EBIT - Taxes (20%) =Unlevered net income +Depreciation - Additions to Net Working Capital - Capital Expenditures =Free Cash Flow 160000 100,000 - 20,000 160000 100,000 - 20,000 160000 100,000 - 20,000 - 300,000 240000 240000 240000 Visby Rides, a livery car company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. The depreciation schedule shown is for three-year, straight-line depreciation. By how much would the net present value (NPV) of this project be increased, if the cars were depreciated by the MACRS schedule shown below given that the cost of capital is 10%? Year 0 Year 2 Year 3 Year 1 44.45% 33.33% 14.81% 7.41% MACRS Depreciation Rate A. $20,189 B. $16,151 C. $24,227 OD. $50,473
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started