You have been asked by the president of your company to evaluate the proposed acquisition of a piece of new equipment for the firm's R&D department. The equipment's price is $30,000, and would be sold after 2 years for $5,000. The equipment is depreciated straight-line to zero over 2 years. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000, which will be recovered when the equipment is sold. The equipment is expected to generate sales of $35,000 per year and operating costs (excluding depreciation) by $10,000 per year. The firm's marginal tax rate is 40%.

You have been asked by the president of your company to evaluate the proposed acquisition of a piece of new equipment for the firm's R&D department. The equipment's price is $30,000, and would be sold after 2 years for $5,000. The equipment is depreciated straight-line to zero over 2 years. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000, which will be recovered when the equipment is sold. The equipment is expected to generate sales of $35,000 per year and operating costs (excluding depreciation) by $10,000 per year. The firm's marginal tax rate is 40%.

Name: You have been asked by the president of your company to evaluate the
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Description: You have been asked by the president of your company to evaluate the proposedacquisition of a piece of new equipment for the firm's R&D department. Theequipment's price is $30,000, and would be sold after 2 years for $5,000. Theequipment is deprecia

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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