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Your firm is considering a new market project. The project will require an equipment purchase of $950,000. The equipment also requires a delivery fee of
Your firm is considering a new market project. The project will require an equipment purchase of $950,000. The equipment also requires a delivery fee of $ 148,000. The project will generate revenue in the amount of $800,000 each year for five years. Annual costs will be 10% of revenue. At the end of five years, the equipment can be sold for $275,000. The firm is in the 30% tax bracket. The equipment will be depreciated using a six-year life and straight- line method. The firm has a 9% weighted average cost of capital. A.) What is the project's initial cash outflow? B.) What is the after -tax salvage value on the equipment sale? C.) What is the project's internal rate of return? Should you accept or reject the project? Why?
A.) What is the project's initial cash outflow? B.) What is the after -tax salvage value on the equipment sale?
C.) What is the project's internal rate of return? Should you accept or reject the project? Why?
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