DataPoint Engineering is considering the purchase of a new piece of equipment for $240,000. It has an
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Year Amount
1 .........$185,000
2 ......... 160,000
3 ......... 130,000
4 ......... 115,000
5 ......... 95,000
6 ......... 85,000
The tax rate is 40 percent. The cost of capital must be computed based on the following (round the final value to the nearest whole number):
a. Determine the annual depreciation schedule.
b. Determine annual cash flow. Include recovered working capital in the sixth year.
c. Determine the weighted average cost of capital.
d. Determine the net present value. Should DataPoint purchase the newequipment?
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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