Question: A company is evaluating a project that involves purchasing a machine for $ 9 8 , 9 9 9 . The machine qualifies for CCA

A company is evaluating a project that involves purchasing a machine for $98,999. The machine qualifies for CCA at 20%. The salvage value after 5 years is $19,652(not taxed). It generates $25,815 in annual revenue and incurs $4,532 in annual operating costs. The tax rate is 30%, and the discount rate is 10%. The CCA class will be terminated. Tasks: 1) Calculate the PV of the CCA Tax Shield. 2) Calculate PV(OCF).3) Calculate the PV of the salvage value. 4) Calculate the total NPV.5) Make a recommendation.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

May i please have assistance with solving the following questions in Excel? A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 B...

Q:

1. The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels...

Q:

Please do all work in excel there are a total of 7 questions to be answered A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 B...

Q:

Keane Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $187,128 and has an estimated useful life of 8 years with zero salvage value. Management...

Q:

Answer the following problems. Show your solutions. 1. Marcus Company is considering purchasing a new equipment for P450,000. It is expected that the equipment will produce net annual cash flows of...

Q:

sub: project managment need ans part by part for each qus. the step must be shown Profitability/Capital Budgeting Techniques for Selection of Projects Problems to be Resolved Problem: I You are...

Q:

Dobbs Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost...

Q:

Frost Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $175,000, has an estimated useful life of 7 years and...

Q:

The cash flows used in capital budgeting calculations are based on historical revenue. forecasts of future cash revenues, cash expenses, and cash investment outlays. forecasts of net income....

Q:

Question 3 (8 marks) Company X is considering an investment opportunity that involves purchasing a machine. The machine costs $125,000 and will have a useful life of three years. Using it will...

Q:

What is the tax effect of a corporation's assuming the debt of a shareholder on property that is exchanged for an ownership interest in the corporation?

Q:

Assign the following molecules to point groups: (a) HF, (b) IF7 (pentagonal bipyramid), (c) XeO2F2, (see-saw), (d) Fe,(CO)9 (22), (e) Cubane, C8H8, (f) Tetrafluorocubane, C8H4F4 (23) cO Fe co 23

Q:

Volunteers serving alcohol at a special event must: Check IDs Charge $ 3 for the service Keep a log of all customers Remove patrons who appear intoxicated

Q:

What are some food related health care issues that inner cities are more likely to see than more affluent areas? Why are certain areas most likely to experience inadequate healthy food options than...