Question: Terry Inc wants to buy a new printing press The

Terry, Inc., wants to buy a new printing press. The cost of the press is $ 300,000, it is expected to last for 10 years after which it will be scrapped with no salvage value, and it will be depreciated uniformly over its life. Terry has an 8 percent cost of capital. Terry, Inc., is subject to a 40 percent tax rate. The pretax net cash inflows are:
Required:
A. Set up a spreadsheet to calculate the present value of the future cash flows.
B. What is the net present value of this equipment?
C. Should Terry invest in the equipment? Why?

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  • CreatedMarch 25, 2015
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