Question
Your firm is considering purchasing new equipment that would cost $10,000,000 ($6,000,000 expensed immediately, and the rest depreciated straight-line over 4 years to a book
Your firm is considering purchasing new equipment that would cost $10,000,000 ($6,000,000 expensed immediately, and the rest depreciated straight-line over 4 years to a book value of zero, after which the equipment will be useless and worth nothing). Operating revenues at t = 1, 2, 3, and 4 years would be $16,000,000 each year and operating costs would be $9,000,000 each year. The tax rate is 20% and the cost of capital is 15% per year. What is the NPV? Express your answer rounded to the nearest whole dollar (do not include a dollar sign).
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Get StartedRecommended Textbook for
Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
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