Assignment_10 - The tax rate is 40%. Weighted average cost...

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Assignment 10 A) Peter, CFO of Campus Company, will replace the existing machine with a new machine that cost $100,000 and required installation cost for $10,000. The new machine will be depreciated over 5 year. The new machine will increase the utilities expenses from $50,000 per year to $70,000. However, the annual salary expense will be reduced from $100,000 to $40,000 per year. The new machine requires investment in net working capital for $22,000. At the end of 5 years, the new machine could be sold to $25,000.
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Unformatted text preview: The tax rate is 40%. Weighted average cost of capital is 20%. The current machine was purchased three years ago. It has original cost of $50,000 and expected useful life of 5 years. It can be sold for $25,000 now. Using Capital budgeting to analyze this project. (the required payback period is 3 years) B) The information of 10 possible projects are provided. If the firm has the investment limitation at $1.5million, which project should be invested...
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This note was uploaded on 01/11/2012 for the course FINANCE fin 3701 taught by Professor Tengihla during the Spring '11 term at Assumption College.

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