Should they remove the equipment before 5 years are up

Reference no: EM13299384

Cost of Capital is 16% for all projects. Corporate taxes are paid at the rate of 35%. Initial project development cost projected at $125,000. Costs would be capitalized and qualify for a CCA rate of 30%. Consultant's fee for the project 15,000 expensed when incurred. To recover cost IT department would charge $310/hr and estimates 100 hours of computer time. If project is successful it will save the company additional dollars (before tax):

year1-70,000
year2- 70,000
year3- 60,000
year4- 30,000
year5- 20,000

1. What is the NPV
2. Salvage value after 3 years would be $30,000, $20,000 after 4 years and $0 after 5 years? Should they remove the equipment before 5 years are up? when?

Reference no: EM13299384

Questions Cloud

Define the carbohydrate content of a glycoprotein : The Carbohydrate content of a glycoprotein is determined to be 12.6, 11.9, 13.0, 12.7, 12.5 g of carbohydrate per 100 g protein in replicate analysis.

Determine the cost of goods available for sale : Which cost flow method results in 1. the highest inventory amount for the balanc sheet abd 2. the highest cost of goods sold for the income statement?

Should you borrow on a long-term or a short-term basis : Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow on a long-term or a short-term basis? Why?

Determine the depth of flow at the transition at a depth : A 1.6-m wide rectangular channel carries 1.8 m3/s at a depth of 0.85 m. The channel undergoes a smooth transition in which the channel bottom rises 15 cm and contracts to a width of 1.3 m. Assuming friction losses are negligible, determine the dep..

Should they remove the equipment before 5 years are up : Salvage value after 3 years would be $30,000, $20,000 after 4 years and $0 after 5 years? Should they remove the equipment before 5 years are up? when?

Compute the peak voltage across the capacitor : An AC generator supplies an rms voltage of 120 V at 60.0 Hz. It is connected in series with a 0.350 H inductor, a 5.00 ?F capacitor, What is the peak voltage across the capacitor

Explain analyze the groups bonded to the carbon of interest : Analyze the groups bonded to the carbon of interest. Every H contributes +1, and every oxygen contributes -2. An -OH group contributes (-2 + 1 = -1). Ignore carbons bonded to the carbon of interest. The sum of the oxidation states must be zero, si..

Create an equivalent synthetic position using stocks : Given the prices below, is it more profitable to borrow money directly or to create an equivalent synthetic position using stocks and stock index futures? Use tables showing the payoffs to compare the two.

What is the expected annual divivdend growth rate : If the stock is selling for $50 today and the required return is 15, what is the expected annual divivdend growth rate after year two?

User Account

All Pages