(Ignore income taxes in this problem.) Your Company’s cost of capital is 3%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is seven years. What is the net present value of purchasing the equipment? Cost of equipment $650,000 Current lease payments $95,000 Working capital needed $80,000 Repair end of year 2 $12,000 Repair end of year 4 $17,000 Salvage value $125,000 Group of answer choices $1,828 $2,103 $3,947 ($62,937) $2,942
(Ignore income taxes in this problem.) Your Company’s cost of capital is 3%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is seven years. What is the net present value of purchasing the equipment? Cost of equipment $650,000 Current lease payments $95,000 Working capital needed $80,000 Repair end of year 2 $12,000 Repair end of year 4 $17,000 Salvage value $125,000 Group of answer choices $1,828 $2,103 $3,947 ($62,937) $2,942
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...
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(Ignore income taxes in this problem.) Your Company’s cost of capital is 3%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is seven years. What is the
| Cost of equipment | $650,000 |
| Current lease payments | $95,000 |
| $80,000 | |
| Repair end of year 2 | $12,000 |
| Repair end of year 4 | $17,000 |
| Salvage value | $125,000 |
Group of answer choices
$1,828
$2,103
$3,947
($62,937)
$2,942
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