Business, 09.11.2019 02:31 chintiffany4779
Quip corporation wants to purchase a new machine for $300,000. management predicts that the machine will produce sales of $200,000 each year for the next 5 years. expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. the firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. quip's combined income tax rate, t, is 40%.
management requires a minimum after-tax rate of return of 10% on all investments. what is the estimated net present value (npv) of the proposed investment (rounded to the nearest hundred)? (the pv annuity factor for 10%, 5 years, is 3.791 and for 4 years it is 3.17. the present value $1 factor for 10%, 5 years, is 0.621.) assume that after-tax cash inflows occur at year-end.
a) $48,800.
b) $99,000.
c) $112,000.
d) $79,800
Answers: 1
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Quip corporation wants to purchase a new machine for $300,000. management predicts that the machine...
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