Mrs. Bean is considering adding a machine to her operation. The machine she wants would cost $35,000, woulc be depreciated on a straight line basis over the 4-year life, and would have zero salvage value. Bean estimates the income from the machine would be $33,000 a year with $12,000 of that amount being variable cost. The fixed con would be $7,250. Bean feels that the machine would not her, after costs, an additional $10,000 in revenue from he operation. The project will require $1,000 of net working capital which is recoverable at the end of the project. Wha is the net present value of this project at a discount rate 12% and a tax rate of 21% ? O a. $28,510.97 O b. $26,840.43 O c. $27,390.19 O d. $23,487.72
Mrs. Bean is considering adding a machine to her operation. The machine she wants would cost $35,000, woulc be depreciated on a straight line basis over the 4-year life, and would have zero salvage value. Bean estimates the income from the machine would be $33,000 a year with $12,000 of that amount being variable cost. The fixed con would be $7,250. Bean feels that the machine would not her, after costs, an additional $10,000 in revenue from he operation. The project will require $1,000 of net working capital which is recoverable at the end of the project. Wha is the net present value of this project at a discount rate 12% and a tax rate of 21% ? O a. $28,510.97 O b. $26,840.43 O c. $27,390.19 O d. $23,487.72
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:Mrs. Bean is considering adding a machine to her operation. The machine she wants would cost $35,000, would
be depreciated on a straight line basis over the 4-year life, and would have zero salvage value. Bean estimates the
income from the machine would be $33,000 a year with $12,000 of that amount being variable cost. The fixed cost
would be $7,250. Bean feels that the machine would net her, after costs, an additional $10,000 in revenue from her
operation. The project will require $1,000 of net working capital which is recoverable at the end of the project What
is the net present value of this project at a discount rate 12% and a tax rate of 21% ?
O a. $28,510.97
O b. $26,840.43
O c. $27,390.19
O d. $23,487.72
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