Calculate the npv for the capital budgeting proposal

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Question 1: Calculate the NPV for the following capital budgeting proposal: $100,000 initial cost for equipment, straight-line depreciation over 5 years to a zero book value, $5,000 pre-tax salvage value of equipment, 35% tax rate, $45,000 additional annual revenues, $15,000 additional annual cash expenses, $8,000 initial investment in working capital to be recouped at project end, and a cost of capital of 11%. Should the project be accepted or rejected? (Show your work computing the NPV.)

Question 2: Explain why bond prices fluctuate in response to changing interest rates. What adverse effect might occur if bond prices remain fixed prior to their maturity?

Reference no: EM132807739

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