Better Tires Corp. is planning to buy a new tire making machine for $80,000 that would save
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Question:
Better Tires Corp. is planning to buy a new tire making machine for $80,000 that would save it $80,000 per year in production costs. The savings would be constant over the project's 3-year life. The machine is to be linearly depreciated to zero and will have no resale value after 3 years.
The appropriate cost of capital for this project is 13% and the tax rate is 21%.
- What is the free cash flowin each year of operation (years 1 to 3)?
- What is the NPV ofthis project?
Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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