Considering buying purification system

Assignment Help Financial Management
Reference no: EM132032595

Oxygen Optimization is considering buying a new purification system. The new system would be purchased today for 17,200 dollars. It would be depreciated straight-line to 2,200 dollars over 2 years. In 2 years, the system would be sold and the after-tax cash flow from capital spending in year 2 would be 3,500 dollars. The system is expected to reduce costs by 6,100 dollars in year 1 and by 12,400 dollars in year 2. If the tax rate is 50 percent and the cost of capital is 5.17 percent, what is the net present value of the new purification system project?

Reference no: EM132032595

Questions Cloud

According to the momentum effect : According to the momentum effect, winner stocks on average generate high returns than loser stocks on average.
What is the net present value of the new oven project : If the tax rate is 50 percent and the cost of capital is 6.28 percent, what is the net present value of the new oven project?
The interest rate cap based on the forecast of libor assumed : The seller of the interest rate cap based on the forecast of LIBOR assumed above over the three-year period is.
Economic explanations of profitable investment strategy : Is it important to know the economic explanations of a profitable investment strategy?
Considering buying purification system : Oxygen Optimization is considering buying a new purification system. what is the net present value of the new purification system project?
Project would require initial investment in equipment : What is the NPV of project A. The project would require an initial investment in equipment of 34,000 dollars and would last for either 3 years or 4 years
Litchfield design is evaluating three-year project : Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 190,000 dollars today.
The momentum effect is against market efficiency : Which model would suggest the momentum effect is against market efficiency?
Fairfax paint is evaluating two-year project : Fairfax Paint is evaluating a 2-year project that would involve buying equipment for 420,000 dollars that would be depreciated to 20,000 dollars over 2 years

Reviews

Write a Review

Financial Management Questions & Answers

  What is the dividend clientele effect

Your company is creating its dividend policy and understands the type of investors it wants to attract. What is the dividend clientele effect?

  The long-term liability section

The long-term liability section of Escovedo Company’s Balance Sheet includes the following accounts: Escovedo Company is an established company and does not experience any financial difficulties or have any cash flow problems. Discuss at least two it..

  Evaluating two different silicon wafer milling machines

You are evaluating two different silicon wafer milling machines. compute the EAC for both machines.

  Use the exact method to determine the number of days

Bill borrows $2400 from Cosa Nostra Loans, who charge 4.7% simple annual interest. Use the exact method to determine the number of days.

  Assume that schenkel uses cumulative voting

Assume that Schenkel uses cumulative voting, and there are four seats in the current election. How much will it cost you to buy a seat?

  Firm has issued cumulative preferred stock

A firm has issued cumulative preferred stock with a $100 par value and a 12 percent annual dividend. For the past two years, the board of directors has decided not to pay a dividend. the preferred stockholders must be paid prior to paying the common ..

  Evaluate the interest rate risk facing bank

Assuming one has been hired to evaluate the interest rate risk facing a bank. How would you explain the interest sensitive gap management to senior management? What solutions would you recommend? Why?

  Discusses the impact of put-call parity on options trading

Write a paragraph that discusses the impact of put-call parity on options trading. Discuss how this idea can be used to design specific strategies. Also discuss the limitations of put-call parity to American-style options.

  Bond investment transactions

Journalize the entries to record the following selected bond investment transactions for Southwest Bank: Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500. Received the first semi annual interest.

  Premerger information about bidding firm-target firm

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 5,600 2,200 Price per share $ 45 $ 19 Firm B has estimated that t..

  Degree of financial leverage under each of three plans

What is the degree of financial leverage under each of the three plans? compute earnings per share (EPS) before the expansion and under the two alternatives.

  Projects is just as risky as the firm existing assets

Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd