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Bertha Co. is considering a new project that will generate CFs of 406,857 over the 4 year life of the project. The project wi
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Answer #1
Time line 0 1 2 3 4
Cost of new machine -1024920
Initial working capital -77189
=Initial Investment outlay -1102109
100.00%
=after tax operating cash flow 406857 406857 406857 406857
reversal of working capital 77189
+Proceeds from sale of equipment after tax =selling price* ( 1 -tax rate) 204984
+Tax shield on salvage book value =Salvage value * tax rate 0
=Terminal year after tax cash flows 282173
Total Cash flow for the period -1102109 406857 406857 406857 689030
Discount factor= (1+discount rate)^corresponding period 1 1.15 1.3225 1.520875 1.7490063
Discounted CF= Cashflow/discount factor -1102109 353788.6957 307642.344 267515.0818 393955.14
NPV= Sum of discounted CF= 220792.00
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