firm is considering a project which would require the purchase of $1mm in equipment, which would be on a 10 yr. straight line depreciation schedule. This would generate $1.6mm in EBIT for each of the next 5 years. The firm's marginal tax rate is 21%. The firm would lose $90,000 in annual cash flows due to existing product sales being cannibalized The firm would sell the equipment after 5 years for $400,000. What is the project NPV, if the firm's WACC is 10%?

firm is considering a project which would require the purchase of $1mm in equipment, which would be on a 10 yr. straight line depreciation schedule. This would generate $1.6mm in EBIT for each of the next 5 years. The firm's marginal tax rate is 21%. The firm would lose $90,000 in annual cash flows due to existing product sales being cannibalized The firm would sell the equipment after 5 years for $400,000. What is the project NPV, if the firm's WACC is 10%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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