DOGSRULE Company is contemplating the purchase of a new piece of equipment that would cost $350,000. The
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DOGSRULE Company is contemplating the purchase of a new piece of equipment that would cost $350,000. The equipment has a four-year life. It will depreciate straight-line. At the end of the project the company will sell the equipment for $40,000. You will save $130,000 before taxes per year and you will be able to reduce net working capital by $50,000. If the tax rate is 21%, what is the IRR?
a. Draw a timeline showing all cashflows.
b. If there is a hurdle rate of 11%, calculate the NPV. Should you accept or reject the project? Why?
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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