What will be the depreciation starting from year zero

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XYZ, Inc. is considering a 5-year project. The production will require net working capital investments each year equal to 15% of the projected sales. Total fixed costs are $1,350,000 per year, variable production costs are $210 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property. The company is in the 35% marginal tax bracket and has a required rate of return on all its projects of 18%. Salvage value will be the same as the book value at the end of year 5. Please finish the project valuation and answer the following questions.

Problem 1: What will be the ending book value starting from year 0 to year 5?

Problem 2: What will be the depreciation starting from year 0 to year 5?

Problem 3: What is the salvage value from year 0 to year 5?

Reference no: EM133001904

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