Consider the following financial information about a retooling project at a computer manufacturing company: ...
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Finance
Consider the following financial information about a retooling project at a computer manufacturing company: The project costs $2.1 million and has a five-year service life. The retooling project has a CCA rate of 30%.
At the end of the fifth year, any assets held for the project will be sold. The expected salvage value will be about 10% of the initial project cost. The firm will finance 40% of the project money from an outside financial institution at an interest rate of 10%. The firm is required to repay the loan with five equal annual payments. The firms incremental (marginal) tax rate on the investment is 35%. The firms MARR is 18%. With the preceding financial information, (a) Determine the after-tax cash flows. (b) Compute the annual equivalent worth for this project.
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