Question
In: Finance
Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $55,000. The saw...
Snowy Mountain Timber Ltd is considering purchasing a new wood
saw that costs $55,000. The saw will generate revenues of $100,000
per year for five years. The cost of materials and labour needed to
generate these revenues will total $60,000 per year, and other cash
expenses will be $10,000 per year. The machine is expected to sell
for $1,000 at the end of its five-year life and will be depreciated
on a straight-line basis over five years to zero. Snowy Mountain’s
tax rate is 34 percent, and its opportunity cost of capital is
17.10 percent. The project's NPV is $___________,The project should
be rejected or accepted?
Solutions
Expert Solution
Solution :
The project's NPV is $ 20,439.58
= $ 20,440 ( when rounded off to the nearest whole number )
The project should be accepted as the NPV is positive.
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 11 months agoRelated Solutions
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