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Unformatted text preview: 1. A firm is considering purchasing a new piece of equipment for $200,000 that will be depreciated using straight line depreciation to a salvage value of zero over its four year projected life. It is projected that the equipment qould lead to an increase in CFBTs of $70,000 each year (years 1-4). Calculate the projects IRR and NPV assuming an 11% required rate of return and a tan rate of 30% and indicate whether the project should be accepted. (IRR = 10.66% and NPV = - $1,443 reject) 2. The Ogren Corporation is considering purchasing a new spectrometer for the firms R&D department. The purchase price is $70,000 and it would cost another $15,000 to modify it for the special use for which it is intended. The spectrometer which falls into the MACRS 3 year property class ( Year 1- 33.33%, Year 2- 44.44%, Year 3- 14.82%, and Year 4-7.41%) is projected to be sold after three years for $30,000. Use of the equipment would result in an increased net working capital of $4,000 over the life of the machine. capital of $4,000 over the life of the machine....
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This note was uploaded on 03/21/2012 for the course FIN 3403 taught by Professor Unknown during the Fall '08 term at FSU.
- Fall '08