Question: You can invest in a machine that costs 500 000 You
You can invest in a machine that costs $500,000. You can expect revenues net of any expense, except maintenance costs, of $150,000 at the end of each year for five years. You will subcontract the maintenance costs at a rate of $20,000 a year, to be paid at the beginning of each year. You expect to get $100,000 from selling the machine at the end of the fifth year. All these revenues and costs are after tax, as is the 10 percent cost of capital. Should you buy the machine?
Answer to relevant QuestionsYou are buying a car. No Better Deals will give you $500 off the list price on a $10,000 car. a. You can get the same car from Best Deals if you pay $4,000 down and the rest at the end of two years. If the interest rate were ...Lolastar Co. is evaluating two competing investment projects. They both require an investment of $25 million. The company cost of capital is 10 percent for projects of this type. The expected cash flows are as follows: a. ...You must choose between the two projects whose cash flows are shown below. The projects have the same risk. a. Compute the internal rate of return and the net present value for the two projects. Assume a 10 percent discount ...Assume that the Clampton Company in the previous problem expects to pay income taxes of 40 percent and that a loss on the sale or disposal of equipment is treated as an ordinary deduction, resulting in a tax savings of 40 ...Office Supplies (OS) Distributors needs a new truck. It can buy it for $24,000, depreciate it over four years at an annual rate of $6,000, and finance the purchase with a four-year loan at 10 percent. The truck could be sold ...
Post your question