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Capital Budgeting7

# Capital Budgeting7 - Year 0 1 MACRS Rates for New Machine 2...

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Old Exam Questions - Capital Budgeting Page 42 of 55 Pages Year 0 1 2 3 4 5 MACRS Rates for New Machine 0.33 0.45 0.15 0.07 0.00 New Depreciation Less: Old Depreciation -\$20,000.00 -\$20,000.00 \$0.00 \$0.00 \$0.00 Net Depreciation Original Cost -\$125,000.00 Freight & Installation -\$15,000.00 Depreciable Basis -\$140,000.00 NOWC -\$20,000.00 Recapture of NOWC Revenues \$50,000.00 \$80,000.00 \$60,000.00 \$50,000.00 \$50,000.00 Less: Operating Costs Less: Net Depreciation EBIT Taxes (40%) Net Income Plus: Net Depreciation Operating Cash Flow Old Salavage Value \$50,000.00 Taxes on Old Salvage Value Net Salvage Value - Old New Salvage Value \$30,000.00 Taxes on New Salvage Value Net Salvage Value - New Free Cash Flow PV Free Cash Flow NPV IRR YOU ARE GIVEN THE FOLLOWING INFORMATION FOR PROBLEMS 66 - 67: Year Project A Project B 0 -\$5,000.00 -\$4,000.00 1 \$6,000.00 \$2,000.00 2 \$5,000.00 \$2,000.00 3 \$3,000.00 \$4,000.00 4 -\$1,000.00 \$4,000.00 5 \$1,000.00 \$3,000.00 66. Assume that the risk-free rate is 6 percent, the return on the market is 11.0 percent, and that Project A has a beta of 1.20. Given this information, determine the net present value (NPV) of Project A. A. \$5,410.36 B. \$8,410.36 C. \$6,410.36

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Old Exam Questions - Capital Budgeting Page 43 of 55 Pages D. \$7,410.36 E. \$9,410.36
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Capital Budgeting7 - Year 0 1 MACRS Rates for New Machine 2...

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