The Board of Directors of XYZ, Inc is evaluating a new piece of equipment that would decrease operating costs by $50,000. The projects cost is $70,000. The project has a 3 year depreciable life and the company will use accelerated depreciation. At the end of 3 years the equipment will be scrapped so the salvage value will be zero. The tax rate is 40% and the project's cost of capital is 12%.

1) Determine the project's NPV showing all work.

2) Would you purchase the equipment and why?

Answer rating: 100% (QA)

1 Calculation of Depreciation by using Double declining methods Do... View the full answer