Net present value of the new purification system project

Assignment Help Financial Management

Reference no: EM131891599

1. Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 170,000 dollars today. The equipment would be depreciated straight-line to 10,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 20,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 125,000 dollars and relevant costs are expected to be 55,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 7.57 percent. What is the NPV of the project?

2. Oxygen Optimization is considering buying a new, high efficiency purification system. The new system would be purchased today for 16,600 dollars. It would be depreciated straight-line to 1,600 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 2,500 dollars. The system is expected to reduce costs by 5,700 dollars in year 1 and by 13,800 dollars in year 2. If the tax rate is 50 percent and the cost of capital is 10.3 percent, what is the net present value of the new purification system project?

Reference no: EM131891599

Questions Cloud

House for the full term and ignore taxes in your analysis : Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis.

Charles probate estate related to revocable living trust : How much is included in Charles’ probate estate related to the revocable living trust? Why?

Compute the efficiency and percent idle time for the system : Use a takt time of 120 seconds and follow the "most following tasks" heuristic rule to assign these tasks to the work stations.

The yield to maturity on comparable-risk bond : Determine the yield to maturity. What is the value of the bonds to you given the yield to maturity on a? comparable-risk bond?

Net present value of the new purification system project : If the tax rate is 50 percent and the cost of capital is 10.3 percent, what is the net present value of the new purification system project?

Explain the independent components of innovation : Take a holistic view of an organization's innovation capability, paying attention to the four independent components of innovation: leadership and organization.

Market required yield to maturity : If the? market's required yield to maturity had fallen to 5 ?percent, what would they have been selling? for?

Discuss the guidance on purpose of the SOW : Briefly discuss the guidance on purpose and content of the SOW, WBS, and Schedule that you will give to this person to assure a "job well done".

Discuss about the self-discipline to eat right : It takes a lot of self-discipline to eat right and to exercise, especially for children. They do not understand why they have to change the way they eat.

User Account

All Pages