Solution-Compute the npv of the project

Compute the npv of the project

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Reference no: EM132820082

Consider the following data

- A machine costs $300 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the new US corporate tax code of 2018.

- This company has current pre-tax profits from other projects that are greater than $300, so it can take full advantage of the investment tax break above in year 0.

- The machine will generate operating profits before depreciation (EBITDA) of $130 per year for 4 years. The first cash flow happens one year after the machine is put in place (year 1).

- Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes.

- The tax rate is 21%

- There is no salvage value at the end of the four years (the machine is worthless), and no required working capital investment.

Compute the NPV of the project if the discount rate is 9%.

Reference no: EM132820082

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Compute the npv of the project

Reference no: EM132820082

Reference no: EM132820082

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