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Use the following data to answer Questions 1 through 14: “MLK Co” is a manufacturing company...

Use the following data to answer Questions 1 through 14:

“MLK Co” is a manufacturing company which is considering the purchase of a new equipment. The below given summarizes all the information related to the equipment:

-Equipment’s price: $180,000
-Shipping: $20,000
-Payment to find a good place to install the equipment: $30,000
-Useful Life : 4 years
-Depreciation Method: MACRS – 3 year class
-Total Revenues/ year: $100,000
-Operating costs (Excluding Depreciation)/year: $25,000
-Salvage Value: $10,000
-Increase in Current Asset: $23,000
-Increase in Current liabilities (Except N/P): $8,000
-WACC: 9%
-Tax rate: 40%

Note: The MACRS rates are 33%, 45%, 15%, and 7% respectively.

12. The Book Value of the equipment at termination is: *

A. $0

B. $10,000

C. $15,000

D. $25,000

E. None of the above

13. The Terminal Value (TV) is: *

A. $25,000

B. $21,000

C. $10,000

D. $70,000

E. None of the above

14. The NPV value of the project is: *

A. $10,460

B. $13,418

C. $41,437

D. $49,258

E. None of the above

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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