In the previous question, suppose the new monitor also requires us to increase net working capital by
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In the previous question, suppose the new monitor also requires us to increase net working capital by $47,200 when we buy it. Further suppose that the monitor could actually be worth $100,000 in five years. What is the new NPV?
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A new electronic process monitor costs $990,000. This cost could be depreciated at 30 percent per year (Class 10). The monitor would actually be worthless in five years. The new monitor would save $460,000 per year before taxes and operating costs. If we require a 15 percent return, what is the NPV of the purchase? Assume a tax rate of 40 percent.
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0071051606
8th Canadian Edition
Authors: Stephen A. Ross, Randolph W. Westerfield
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