90.2K

Verified Solution

Link Copied!

Check my work The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $160,000. Of this amount, $145,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $15,000. The depreciated assets will have zero resale value. Use Table 12-12. 10 points The contract will require an additional investment of $47,000 in working capital at the beginning of the first year and, of this amount, $27,000 will be returned to the Spartan Technology Company after six years. eBook Hint The investment will produce $52,000 in income before depreciation and taxes for each of the six years. The corporation is in a 25 percent tax bracket and has a 8 percent cost of capital. Print a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) References Net present value Table 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 3-Year MACRS 5-Year MACRS 7-Year MACRS 10-Year 15-Year MACRS ! MACRS 20-Year MACRS 0.333 0.445 0.148 0.074 0.200 0.320 0.192 0.115 0.115 0.058 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 0.050 0.095 0.086 0.077 0.069 0.062 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.030 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 1.000 1.000 1.000 1.000 1.000 1.000

Answer & Explanation Solved by verified expert

See Answer