FITCO is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 is

Question:

FITCO is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 is needed to install it. The equipment will be depreciated straight-line to zero over a five-year life. The equipment will generate additional annual revenues of $265,000, and it will have annual cash operating expenses of $83,000. The equipment will be sold for $85,000 aft er five years. An inventory investment of $73,000 is required during the life of the investment. FITCO is in the 40 percent tax bracket, and its cost of capital is 10 percent. What is the project NPV?

a. $47,818.

b. $63,658.

c. $80,189.

d. $97,449.

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...