Use the following information to answer the question(s)below.
(Include the MACRS Table from the Appendix. )
Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of $540,000.These tractors are expected to generate EBITDA of $250,000 for each of the next three years.Casa Grande Farms has a 35% tax rate and has a cost of capital of 10%.
-Assuming that Casa Grande Farms depreciates these tractors straight line over the three year life,then the NPV of buying the tractors is closest to:
A)20,785
B)36,225
C)81,715
D)513,235

Question

Quizplus · Accepted Answer

A)Cash Flows (1 - 3)= (250,000 - 540,000 × 1/3)× (1 - .35)+ 540,000 × 1/3 = 225,500 CF₀ = - 540,000,CFj = 225,500,Nj = 3,I = 10,Compute NPV = 20,785.12

Use the Following Information to Answer the Question(s)below