Equipment Cost: $50 (million) Directions to go by for the assignment: The estimated life of the equipment will be 12 years. The salvage value of the equipment will be 5% of the equipment's cost. The...


Equipment Cost: $50 (million)



Directions to go by for the assignment:


The estimated life of the equipment will be 12 years. The salvage value of the equipment will be 5% of the equipment's cost.


The annual EBIT for this new project will be 18% of the project's cost


The company will use the straight-line method to depreciate this equipment. Use 35% as the tax rate.


The hurdle rate for this assignment will be the WACC which is 13.21%




Requirements for the Assignment (things I need answered or help with):



  • Your calculations that convert the project's EBIT to free cash flow for the 12 years of the project.

  • The following capital budgeting results for the assignment

    • Net present value

    • Internal rate of return

    • Discounted payback period.





  • Should the project be accepted or rejected?



Jun 08, 2022
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