Solution-Compute the npv of the project if the discount rate

Compute the npv of the project if the discount rate

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Reference no: EM132938094

A machine costs $600 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the new US corporate tax code of 2018.

This company has current pre-tax profits from other projects that are greater than $600, so it can take full advantage of the investment tax break above in year 0.
The machine will generate operating profits before depreciation (EBITDA) of $210 per year for 5 years. The first cash flow happens one year after the machine is put in place (year 1).
Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes.
The tax rate is 21%
There is no salvage value at the end of the four years (the machine is worthless), and no required working capital investment.

Problem 1: Compute the NPV of the project if the discount rate is 11%.

Reference no: EM132938094

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Compute the npv of the project if the discount rate

Reference no: EM132938094

Reference no: EM132938094

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