Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Eggz, Incorporated, is considering the purchase of new equipment that will
allow the company to collect loose hen feathers for sale. The equipment will
cost $455,000 and will be eligible for 100 percent bonus depreciation. The
equipment can be sold for $63,000 at the end of the project in five years.
Sales would be $347,000 per year, with annual fixed costs of $53,000 and
variable costs equal to 40 percent of sales. The project would require an
investment of $37,000 in NWC that would be returned at the end of the
project. The tax rate is 21 percent and the required return is 13
percent. Calculate the NPV of this project. (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
$ 409,610.75
NPV
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Transcribed Image Text:Eggz, Incorporated, is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $455,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $63,000 at the end of the project in five years. Sales would be $347,000 per year, with annual fixed costs of $53,000 and variable costs equal to 40 percent of sales. The project would require an investment of $37,000 in NWC that would be returned at the end of the project. The tax rate is 21 percent and the required return is 13 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. $ 409,610.75 NPV
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