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

Ask an Expert

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

Write your message here..

Related Questions

#title.BA300, Answers Answers

Audit systems, Enron did not manages its trade account receivable in signif... Enron did not manages its trade account receivable in significant manner that made huge financial loss for the organizations. Hence, the management faced biggest fraud due to the f

Risk-free interest rate, Price an Asian call option with on a stock with th... Price an Asian call option with on a stock with the initial stock price $50 and volatility 30$. The strike price of the option is $52. The time to maturity of the option is 3 month

WACC, Keys Printing plans to issue a $1,000 par value, 10-year noncallable ... Keys Printing plans to issue a $1,000 par value, 10-year noncallable bond with a 5.00% coupon, paid semiannually. It should sell at par. The company''s marginal tax rate is 40.00%

Explain about book value weights, Q. Explain about Book Value Weights? ... Q. Explain about Book Value Weights? Book Value Weights: - Book value weights are calculating form the values taken from the balance sheet. The weight to be assigned to every s

Benefits of going private company, Benefits of Going private company A... Benefits of Going private company A public company has its shares purchased by a small group of people and ceases to be listed on stock exchange. This has many benefits includ

Merits and demerits of accept-reject criteria, Q. Merits of accept-reject c... Q. Merits of accept-reject criteria? Merits of ARR:- (i) Simple: - ARR method is very simple to understand and use. (ii) Complete life time of the project is considered:

Activity-based management - abm, A procedure that invented in the 1980s for... A procedure that invented in the 1980s for evaluating the processes of a business to find strengths and weaknesses. Specially, activity-based management finds out areas where a bus

Functions of finance financial management, Q. Explain Functions of Finance ... Q. Explain Functions of Finance Financial Management? Functions of Finance or else Financial Management: - The functions of Financial Management are: (1) Determining the Fin

Explain about the interest payments, Explain about the Interest payments ... Explain about the Interest payments Debenture interest is generally paid semi-annually however annual payments aren't uncommon.  Usually there are registered debentures on whic