A company is considering purchasing a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a zero scrap value after five years. For simplicity, assume straight-line depreciation to zero, a marginal tax rate of 34 percent, and a required return of 10 percent. The net present value of acquiring this machine is: a) $83. b) $449. c) $10,449. d) $10,083.
A company is considering purchasing a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a zero scrap value after five years. For simplicity, assume straight-line depreciation to zero, a marginal tax rate of 34 percent, and a required return of 10 percent. The net present value of acquiring this machine is: a) $83. b) $449. c) $10,449. d) $10,083.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 11P
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A company is considering purchasing a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a zero scrap value after five years. For simplicity, assume straight-line
a) $83.
b) $449.
c) $10,449.
d) $10,083.
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