Excel_Project__4 - and can be sold today for $50K Expenses...

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A firm is considering replacing its aging production equipment. The firm has a cost of capital of 9.5%. Its marginal tax rate is 40%. The new equipment will cost $1.2M inclusive of shipping and installation. It will have an expected life of 5 years. Revenues are expected to increase $600K the first year and $50K a year thereafter. The company uses straight line depreciation and no salvage value is assumed. The old equipment is fully depreciated
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Unformatted text preview: and can be sold today for $50K. Expenses will increase $96K the first year and increase $25K each year thereafter. The week long training seminar will be held in Toronto and will cost $10K. Net working capital will increase $40K. We think we may be able to sell the new equipment for $75K in five years. What is the NII? What are the annual cash flows? What is the terminal value? What is the NPV?...
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