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Data for all Milton Industries problems are the same.  Milton Industries wants to purchase new equipment that has a quoted price of $1,000,000.  Milton estimates an additional cost of $75,000 will be needed today to have the equipment modified, shipped, and installed.  The purchase of this additional equipment will require Milton to invest an estimated $

Data for all Milton Industries problems are the same.  Milton Industries wants to purchase new equipment that has a quoted price of $1,000,000.  Milton estimates an additional cost of $75,000 will be needed today to have the equipment modified, shipped, and installed.  The purchase of this additional equipment will require Milton to invest an estimated $

Essentials Of Investments
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
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Data for all Milton Industries problems are the same.  Milton Industries wants to purchase new equipment that has a quoted price of $1,000,000.  Milton estimates an additional cost of $75,000 will be needed today to have the equipment modified, shipped, and installed.  The purchase of this additional equipment will require Milton to invest an estimated $85,000 in net working capital upfront, and this investment should be recovered when Milton sells the equipment.  If purchased, the equipment will be employed for a total of six years, and then sold for an estimated $780,000.  The equipment will be depreciated straight-line on a six-year schedule.  During each of the years that the equipment is in service, it is expected to boost Milton’s sales revenue by $398,000 though annual operating costs (other than depreciation) are also expected to be higher, to the extent of $94,000.  Milton faces a marginal tax rate of 35%, and its cost of capital is 10.5%.  The annual net cash flow from this project for each of the years 1 through 5 is:

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