Calculate the net present value of a purchase of earthmover, Financial Management

Your construction company is evaluating the proposed acquisition of a new earthmover. A consulting company you hired developed the following analysis last year at a cost to you of $6,000. The earthmover's basic price is $50,000 and will need to be modified for your purposes for another $10,000. The earthmover falls into the 3 year MACRS class and will be sold at the end of 3 years for $25,000. Use of the earthmover will require an immediate increase of $2,000 in spare parts inventory (working capital), which is expected to be fully recovered when the earthmover is sold. The earthmover is expected to save $20,000 in labor costs each year. Your company's marginal tax rate is 34% and your cost of capital is 10%. You must now make a decision. What is this purchase's NPV?

Posted Date: 3/2/2013 3:15:01 AM | Location : United States







Related Discussions:- Calculate the net present value of a purchase of earthmover, Assignment Help, Ask Question on Calculate the net present value of a purchase of earthmover, Get Answer, Expert's Help, Calculate the net present value of a purchase of earthmover Discussions

Write discussion on Calculate the net present value of a purchase of earthmover
Your posts are moderated
Related Questions
What is the most conservative type of working capital financing plan a company could implement?  Explain. An all equity capital structure would be the mainly conservative type

A developer has purchased a commercial office site in Melbourne and wishes to develop a building which will be sold to an institutional owner before completion of the building.

Q. Describe about Permanent Working Capital? Permanent Working Capital: - The requirement for working capital fluctuates from time to time. Nevertheless to carry on day-to-day

Presently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is $1.52/£. The three-month interest rate is 8.0% per year in the U.S. and 5.8% per year in t

Describe the major financial problems of a firm The three questions posed above cover between them the major financial problems of a firm. Or we can say that financial manageme

T he acquisition strategy The most important strategic consideration is the size of the acquisition. The completion of smaller series should be considered in the beginning tha

Pull Strategy Pull strategy define a marketing approach in which a manufacturer promotes a product directly to consumers in the hopes that the consumers will then request

The Financial Services Authority in the United Kingdom: The Financial Services Authority (FSA) in the United Kingdom (UK) is the financial watchdog. It is a company limited by

You are currently employed by DPT Holdings Ltd (DPT) one of the world's largest MNEs based in the United Kingdom. DPT is looking to enter into a new phase of global expansion activ

To begin this topic, the case of China Sky describes the appointment of a special auditor  in the organization that is also a rule in the procedures of Singapore Exchange (SGX). Th