Calculate the npv of each option

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Reference no: EM132020131

Syntec Utilities needs to purchase a new piece of equipment in order to meet EPA requirements for carbon emissions. The company has two options for purchasing the equipment:

Also assume Option B will get a tax rebate of $20,000 in year 4 and $15,000 in year 8. Syntec Utilities has a beta of .8, the risk free-rate is 3% and the market risk premium is 8%.

A. Calculate the NPV of each option ,Which strategic decision should Syntec Utilities take? Why?

	Initial	Main. Costs	Expected	Salvage
Option	Investment	(per year)	Life (yrs)	Value
A	18,000	2,000	6	4,100
B	28,000	1,900	13	1,000

Reference no: EM132020131

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