Business, 07.03.2020 04:51 coopyishome

Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000. Stanton will use the MACRS method to depreciate the machine and it expects to sell the machine at the end of its 5-year operating life for $10,000 before taxes. Stanton's marginal tax rate is 40 per cent and its uses a 9 per cent required rate of return to evaluate projects of this type.

If the machines cost $40,000 what is the project's NPV?

a) $7,500

b) $1,014

c) $2,292

d) $5,040

e) $817

Answers: 2

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Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $...