10% 33.33% $90,000 $10,000 Recognize at t=0 and recpature at end $40,000 30% $5,000 WACC Depreciation per/year Cost of Equipment Working Capital Needed 44.45% 14.81% 7.41% Pre Tax Savings /New Machine Tax Rate Salvage Value
10% 33.33% $90,000 $10,000 Recognize at t=0 and recpature at end $40,000 30% $5,000 WACC Depreciation per/year Cost of Equipment Working Capital Needed 44.45% 14.81% 7.41% Pre Tax Savings /New Machine Tax Rate Salvage Value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Cash flow estimation:
Horan Films is considering some new equipment whose data are shown below (in the screenshot). The equipment is classified under a 3-year MACRS class, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. The cost savings from the new equipment is given below and is expected to be constant throughout the project's life. What is the project's
Transcribed Image Text:10%
33.33%
$90,000
$10,000 Recognize at t=0 and recpature at end
$40,000
30%
$5,000
WACC
Depreciation per/year
Cost of Equipment
Working Capital Needed
44.45%
14.81%
7.41%
Pre Tax Savings /New Machine
Tax Rate
Salvage Value
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