Contract with digital system-calculate the net present value

Assignment Help Financial Management

Reference no: EM131929239

The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $185,000. Of this amount, $160,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $25,000 after taxes. The depreciated assets will have zero resale value. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

The contract will require an additional investment of $49,000 in working capital at the beginning of the first year and, of this amount, $29,000 will be returned to the Spartan Technology Company after six years.

The investment will produce $61,000 in income before depreciation and taxes for each of the six years. The corporation is in a 40 percent tax bracket and has a 6 percent cost of capital.

a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Net present value $

Reference no: EM131929239

Questions Cloud

Appreciation for animals and the natural world : Explain how poems can instill an appreciation for animals and the natural world in children for example little bo peep, baa baa black sheep. (150 please)

An essay about the article-the real scoop on government : Prepare a one-page single-spaced abstract of the article and provide the abstract, not the entire article, to the professor.

Sentence of the first paragraph : The last sentence of the first paragraph of this paper sparked something else in me. It is very true that if you voice your opinion people will.

Identify the grammatical form of the utterance : Identify the grammatical form of the utterance: declarative, interrogative, imperative.

Contract with digital system-calculate the net present value : The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. Calculate the net present value.

What is your overall assessment of presidential policy : What is your overall assessment of Presidential Policy Directive, the National Preparedness Goal-Second Edition.

Why are financial options important : What is a financial option? Why are financial options important?

Thinking about educational level : Not thinking about educational level, what do some of the rest of you think about a nursing shortage? Is there one?

Identify any organizational or supervisory relationships : Identify positions and include additional training that will be required for each to prepare individuals for program-specific activities.

User Account

All Pages