Buying equipment-What are the project NPV and IRR

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Reference no: EM131935581

Huskers Company is thinking of buying a new equipment, and the key data are shown below. The equipment that would be used would be depreciated by 5-year MACRS method over the project's 3-year life, and would have $10,000 salvage value at the end of the third year. Revenues and other operating costs would be constant over the project's 3-year life. What are the project's NPV and IRR?

WACC = 10.0%

Net equipment cost (depreciable basis) =$100,000

Additional sales revenues as a result of the new equipment purchase = $150,000 per year durinh the next three years.

Operating costs excl. depreciation =$25,000 per year

Tax rate 35.0%

MACRS weights: 20%, 32%, 19.2%, 11.52%, 11.52% and 5.76% for years 1, 2, 3, 4, 5 and 6 respectively.

Reference no: EM131935581

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