Ms. Sarah is considering the purchase of a new piece of equipment that has a net...
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Ms. Sarah is considering the purchase of a new piece of equipment that has a net initial investment with a present value of 4,000,000. The equipment has an estimated useful life of 4 years. For tax purposes, the equipment will be fully depreciated at rates of 30%, 30%, 20% and 20%, in years one, two, three and four, respectively. The new machine is expected to have a 200,000 salvage value. The machine is expected to save the company 1,700,000 per year in operating expenses. Ms. Sarah has a 30% marginal income tax rate and a 12% cost of capital. Discount rates for a 12% rate are Year 1 Year 2. Year 3 Year 4 Present Value of an Ordinary Annuity of 1 0.893 1.690 2.402 3.037 1. What is the net present value of this project? 2. What is the profitability index for the project? 3. The payback period for this investment is? Present Value of 1 0.883 0.797 0.712 0.636 Ms. Sarah is considering the purchase of a new piece of equipment that has a net initial investment with a present value of 4,000,000. The equipment has an estimated useful life of 4 years. For tax purposes, the equipment will be fully depreciated at rates of 30%, 30%, 20% and 20%, in years one, two, three and four, respectively. The new machine is expected to have a 200,000 salvage value. The machine is expected to save the company 1,700,000 per year in operating expenses. Ms. Sarah has a 30% marginal income tax rate and a 12% cost of capital. Discount rates for a 12% rate are Year 1 Year 2. Year 3 Year 4 Present Value of an Ordinary Annuity of 1 0.893 1.690 2.402 3.037 1. What is the net present value of this project? 2. What is the profitability index for the project? 3. The payback period for this investment is? Present Value of 1 0.883 0.797 0.712 0.636
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Answer rating: 100% (QA)
To calculate the net present value NPV profitability index PI and payback period for this investment well follow these steps Step 1 Calculate the cash ... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
Posted Date:
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