Question: Over the next six years, a quarry is expected to lose $2.6 million per year (before tax) due to poor crusher performance and high maintenance
Over the next six years, a quarry is expected to lose $2.6 million per year (before tax) due to poor crusher performance and high maintenance costs. This amount is considered excessive, so you are currently investigating several alternatives to resolve the problem. Your management is advocating for Alternative A, which is described below. What is the incremental after-tax NPV of selecting this option versus doing nothing and accepting the current losses? The sign of your answer is significant. Enter a positive value if Alternative A is favorable or a negative value if Alternative A is unfavorable. Alternative A: Spend $9.6 million in year O on a new crusher that would last 6 years and reduce losses to $0.25 million per year. Please consider the following assumptions in your analysis: The analysis horizon is fixed at 6 years, and the overall operation is anticipated to be profitable during this period, The discount rate is 15%, The tax rate is 25%, and taxes are relevant for this problem, Losses can be
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