ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)
ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter21: Costs And The Supply Of Goods
Section: Chapter Questions
Problem 17CQ
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