Question

A company is considering the purchase of a major piece of equipment for its manufacturing plant....

A company is considering the purchase of a major piece of equipment for its manufacturing plant. The project would cost $22m in initial investment and would result in cost savings, before tax, of $3.25m per year for five years.

The equipment could be sold for $4.5m at the end of the five years. The equipment would also result in an increase in NWC of $500,000, which will be recovered at the end of the project.

The company’s CCA rate is 25% and the corporate tax rate is 34%.

The company's WACC is 9.39%

Calculate PVCCATs using the Tax Shield Approach

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company is considering the purchase of a major piece of equipment for its manufacturing plant....
A company is considering the purchase of a major piece of equipment for its manufacturing plant. The project would cost $22m in initial investment and would result in cost savings, before tax, of $3.25m per year for five years. The equipment could be sold for $4.5m at the end of the five years. The equipment would also result in an increase in NWC of $500,000, which will be recovered at the end of the project. The company’s CCA rate is...
A company is considering a project which will require the purchase of $805,000 in new equipment....
A company is considering a project which will require the purchase of $805,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $292,000. Initial net working capital equal to 36.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $685,000 in new equipment....
Your company is considering a project which will require the purchase of $685,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $244,000. Initial net working capital equal to 30.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $785,000 in new equipment....
Your company is considering a project which will require the purchase of $785,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $284,000. Initial net working capital equal to 35.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $645,000 in new equipment....
Your company is considering a project which will require the purchase of $645,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $228,000. Initial net working capital equal to 28.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
A company is considering a project which will require the purchase of $705,000 in new equipment....
A company is considering a project which will require the purchase of $705,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $252,000. Initial net working capital equal to 31.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $815,000 in new equipment....
Your company is considering a project which will require the purchase of $815,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $296,000. Initial net working capital equal to 37.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $745,000 in new equipment....
Your company is considering a project which will require the purchase of $745,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $268,000. Initial net working capital equal to 33.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $745,000 in new equipment....
Your company is considering a project which will require the purchase of $745,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $268,000. Initial net working capital equal to 33.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $675,000 in new equipment....
Your company is considering a project which will require the purchase of $675,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $240,000. Initial net working capital equal to 30.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT