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PART III. Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,00
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Answer #1
NPV Calculation
Year 0 1 2 3 4
Revenue $ 21,000.00 $ 21,000.00 $ 21,000.00 $ 21,000.00
Maintenance expense $    2,000.00 $    2,500.00 $    3,000.00 $    3,500.00
Depreciation $ 11,332.20 $ 15,113.00 $    5,035.40 $    2,519.40
Interest $    2,000.00 $    1,395.77 $       731.22
EBT $    5,667.80 $    1,991.23 $ 12,233.38 $ 14,980.60
Tax @ 40% $    2,267.12 $       796.49 $    4,893.35 $    5,992.24
PAT $    3,400.68 $    1,194.74 $    7,340.03 $    8,988.36
Add: depreciation $ 11,332.20 $ 15,113.00 $    5,035.40 $    2,519.40
Less: initial investment $ 14,000.00
Less: principal paid back $    6,042.30 $    6,646.53 $    7,311.08
Net Cash Flow $ -14,000.00 $    8,690.58 $    9,661.21 $    5,064.35 $ 11,507.76
NPV @ 10% $ 13,549.87
Depreciation
Year 0 1 2 3 4
Percentage % 33.33% 44.45% 14.81% 7.41%
Depreciation $ 11,332.20 $ 15,113.00 $    5,035.40 $    2,519.40
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