XYZ Company is considering the purchase of a new piece of
equipment and has gathered thePresent Value of a LumpSum
Present Value of an Annuity following information about
the purchase:
Initial investment $
Annual cost savings $
Salvage value in years $
Overhaul of engine needed in years $
Working capital needed now
Cost of capital
Life of project years
Income tax rate
If the new equipment is purchased, then the machine that
is currently being used can be sold at the time of buying
the new equipment for $
The working capital needed now will be released for
investment elsewhere at the end of the seven years.
The net present value of the new equipment is $
Calculate the amount of the working capital needed now.
