16-58 Capital-Budgeting Analysis

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Business Finance

Master in Accounting

Indiana Wesleyan University

Description

Prepare a net-present-value analysis of the purchase and installation of the material-handling system using the revised estimates obtained by Leland Forrest. (For this problem, ignore the half-year convention. Assume annual straight-line depreciation of $562,500, which is $4,500,000 ÷ 8.) (Round your "Discount factor" to 3 decimal places. Negative amounts should be indicated by a minus sign.)

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Explanation & Answer

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The total revenue of the sales =700,000
40% tax rate of revenues 40/100*700,000
=280,000
The benefits or revenues 700,000-280,000
=420,000
Total cost from year 1 to year 5 = 1,000,000+200,000+800,000
=2,000,000
The...


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