Q2. Reyes Inc. is considering investing $8 million in computer equipment that is expected to have...
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Q2. Reyes Inc. is considering investing $8 million in computer equipment that is expected to have a useful life of 4 years, and is expected to reduce the firm's labor costs by $3 million per year. Assume that Reyes, Inc. pays a 32fl tax rate on accounting profits and uses the straight-line depreciation method. What is the after-tax cash flow from the investment in years 1 through 4? If the firm's hurdle rate for the project is 13fl per year is it worthwhile? What are the investment's NPV? Q2. Reyes Inc. is considering investing $8 million in computer equipment that is expected to have a useful life of 4 years, and is expected to reduce the firm's labor costs by $3 million per year. Assume that Reyes, Inc. pays a 32fl tax rate on accounting profits and uses the straight-line depreciation method. What is the after-tax cash flow from the investment in years 1 through 4? If the firm's hurdle rate for the project is 13fl per year is it worthwhile? What are the investment's NPV?
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