Question
In: Finance
Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price...
Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $50,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project? Answer is -$16,752 but how do I get that?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price...
Riverview Company is evaluating the proposed acquisition of a
new production machine. The machine's base price is $200,000, and
installation costs would amount to $28,000. Also, $10,000 in net
working capital would be required at installation. The machine will
be depreciated for 3 years using simplified straight line
depreciation. The machine would save the firm $110,000 per year in
operating costs. The firm is planning to keep the machine in place
for 2 years. At the end of the second...
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