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?
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?
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 15P
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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
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?
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