What is the NPV assuming a 12% rate of return. (ignore Tax) Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Depreciation is $10, 230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. Calculate NPV assuming a 12% rate of return

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
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Author:MOYER
Publisher:MOYER
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
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What is the NPV assuming a 12% rate of return. (ignore Tax) Bramble Inc. is
considering modernizing its production facility by investing in new equipment
and selling the old equipment. The following information has been collected
on this investment: Depreciation is $10, 230 per year for the old equipment.
The straight-line depreciation method would be used for the new equipment
over an eight-year period with salvage value of $4,600. Calculate NPV
assuming a 12% rate of return
Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The
following information has been collected on this investment:
Cost
Old Equipment
Accumulated depreciation
Remaining life
Current salvage value
Salvage value in 8 years
Annual cash operating costs
$81,840 Cost
$41,000
8 years
$11,200
$0
$35,700
New Equipment
Estimated useful life
Salvage value in 8 years
Annual cash operating costs
$38,000
8 years
$4,600
$30,700
Depreciation is $10,230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment
over an eight-year period with salvage value of $4,600.
Transcribed Image Text:What is the NPV assuming a 12% rate of return. (ignore Tax) Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Depreciation is $10, 230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. Calculate NPV assuming a 12% rate of return Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $81,840 Cost $41,000 8 years $11,200 $0 $35,700 New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs $38,000 8 years $4,600 $30,700 Depreciation is $10,230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
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