HIST 1402 Chapter Notes - Chapter 23: Tax Rate, Macrs, Net Present Value
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You are considering the purchase of new equipment. The equipment falls into the macrs 3-year class. The equipment would require a ,000 increase in working capital. The incremental revenues will be ,000 with no changes in expenses. After year 4, the operating cfs will drop by 6%. The marginal tax rate is 40%, and the wacc is 12%. Question 1: what is the cfo: -,000. Question 2: use macrs 3-year asset to nd depreciation: ,500. Question 3: what are the net operating cash ows: ,120. Question 4: what is the cf5: ,940. Question 5: what is the tv4: ,333. 33. Question 6: what is the npv: ,222. 84. Question 7: what is the irr: 16. 14% Question 8: should the new equipment be purchased and why: the new equipment purchased because the npv is greater than 0 and the irr is greater than 12%. Information for questions 1 3: cape, inc. , is concerned about the risk of a project they are evaluating.
