n officer for a large construction company is feeling nervous. The anxiety is caused by a new excavator just released onto the market. The new excavator makes the one purchased by the company a year ago obsolete. As a result, the market value for the company’s excavator has dropped significantly, from $600,000 a year ago to $50,000 now. In ten years, it would be worth only $3,000. The new excavator costs only $950,000 and would increase operating revenues by $90,000 annually. The new equipment has a ten-year life and expected salvage value of $175,000. The tax rate is 35%, the CCA rate, 25% for both excavators, and the required rate of return for the company is 14%. What is the NPV of the new excavator? (Negative answer should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $
An officer for a large construction company is feeling nervous. The anxiety
is caused by a new excavator just released onto the market. The new
excavator makes the one purchased by the company a year ago obsolete.
As a result, the market value for the company’s excavator has dropped
significantly, from $600,000 a year ago to $50,000 now. In ten years, it
would be worth only $3,000. The new excavator costs only $950,000 and
would increase operating revenues by $90,000 annually. The new
equipment has a ten-year life and expected salvage value of $175,000. The
tax rate is 35%, the CCA rate, 25% for both excavators, and the required
rate of return for the company is 14%. What is the
excavator? (Negative answer should be indicated by a minus sign. Do not
round your intermediate calculations. Round the final answer to 2
decimal places. Omit $ sign in your response.)
NPV $
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