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1 Name _______________________ FIN6120 Final Exam, December 2011 (25 multiple choice questions); 2 short Excel problems 1. For capital budgeting and...
(year 1). The mover’s price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the earth mover will be depreciated 3-years MACRS. After 4 years the mover will be scrap. The earth mover will require an increase in net working capital (spare parts inventory) of $2,000, recovered at project end. The earth mover would have no effect on revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor, beginning in the year of acquisition. The firm’s marginal federal-plus-state tax rate is 40%. Farr’s WACC is 6%.a.
