Question: 39 Based on the information listed below concerning a capital budgeting project, the Initial net cash flow of this project (ie. CFO) is $ Last

39
39 Based on the information listed below concerning a capital budgeting project,
the Initial net cash flow of this project (ie. CFO) is $

Based on the information listed below concerning a capital budgeting project, the Initial net cash flow of this project (ie. CFO) is $ Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 will cost $4 million The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years. . If purchased the ECU-9 will increase revenues by $2,3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project, The marginal tax rate is 25%. The cost of capital is 13.00%. 1) -4.150.000 . will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project The marginal tax rate is 25% The cost of capital is 13.00%. 1) -4,150,000 2) -4,180,000 3) -4,160.000 4) -4,140,000 5) -4,170,000

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