Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm is contemplating the purchase of a new $430,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year

image text in transcribedimage text in transcribed

Your firm is contemplating the purchase of a new $430,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $37,000 at the end of that time. You will be able to reduce working capital by $42,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 22 percent. . What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value b. Suppose your required return on the project is 10 percent and your pretax cost savings are $142,000 per year. What is the annual OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |CF What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV C. Suppose your required return on the project is 10 percent and your pretax cost savings are $96,000 per year. What is the annual OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.) OCF What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance A Contemporary Application of Theory to Policy

Authors: David N Hyman

11th edition

9781305474253, 1285173953, 1305474252, 978-1285173955

More Books

Students also viewed these Finance questions

Question

If n N, prove that 5Fn+2 = Ln+4 - L.

Answered: 1 week ago