Cost of materials and labor needed to generate revenues

Assignment Help Financial Management

Reference no: EM131902842

Rocky Mountain Lumber, Inc., is considering purchasing a new wood saw that costs $40,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,700 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 10.00 percent. What is the project's NPV? (Do not round intermediate calculations. Round final answer to the nearest whole dollar, e.g. 5,275.)

NPV $

Should the company purchase the saw?

Reference no: EM131902842

Questions Cloud

Incremental after-tax free cash flows from new fragrance : Assume that the marginal tax rate is 40 percent. What are the expected annual incremental after-tax free cash flows from the new fragrance?

Prepare and analyze each planned capital expenditure : Construct and recommend between three and five metrics to measure the performance of the organization.

Why is it easier to develop a deficiency of the b vitamins : Why is it easier to develop a deficiency of the B vitamins than to develop a deficiency of vitamin A?

Discuss factors that may contribute to external information : Discuss factors that may contribute to the external information search and factors that act to reduce external search for information before purchase.

Cost of materials and labor needed to generate revenues : The cost of materials and labor needed to generate these revenues will total $60,000 per year. What is the project's NPV?

List the members of the neurotrophin family of neurotrophic : a) List the members of the neurotrophin family of neurotrophic factors and their recep

How might use time value money methods : Also, how might use time value money methods in your own personal financial decision making ?

How can partnerships enhance the performance of supply chain : What is systems thinking and how does it relate to global supply chain management? How can partnerships enhance the performance of a supply chain?

What is the preferred corticosteriod for chrons disease : What is the preferred corticosteriod for Chrons Disease that even demonstrates better response vs. mesalamine.

User Account

All Pages