Glencore Co is a glasses manufacturing company. Glencore is considering purchasing a new piece of manufacturing equipment for $2,000,000. The equipment is expected to last for 10 years, and management projects that purchasing the equipment would result in an additional $300,000 in pre-tax cash flow per year. Management does not expect the equipment to have any value at the end of 10 years, and so will fully depreciate the equipment on a straight-line basis.
To obtain the funds to purchase this equipment, Glencore plans to raise capital from the following sources:
Glencore's tax rate is 20%.
What is the Net Present Value of the proposed investment? Use a financial calculator to compute the Present Value of the future cash flows.

Question

Glencore Co is a glasses manufacturing company. Glencore is considering purchasing a new piece of manufacturing equipment for $2,000,000. The equipment is expected to last for 10 years, and management projects that purchasing the equipment would result in an additional $300,000 in pre-tax cash flow per year. Management does not expect the equipment to have any value at the end of 10 years, and so will fully depreciate the equipment on a straight-line basis. 
To obtain the funds to purchase this equipment, Glencore plans to raise capital from the following sources:
  Glencore's tax rate is 20%.
What is the Net Present Value of the proposed investment? Use a financial calculator to compute the Present Value of the future cash flows.

Quizplus · Accepted Answer

The Answer of Glencore Co is a glasses manufacturing company. Glencore is considering purchasing a new piece of manufacturing equipment for $2,000,000. The equipment is expected to last for 10 years, and management projects that purchasing the equipment would result in an additional $300,000 in pre-tax cash flow per year. Management does not expect the equipment to have any value at the end of 10 years, and so will fully depreciate the equipment on a straight-line basis. 
To obtain the funds to purchase this equipment, Glencore plans to raise capital from the following sources:
  Glencore's tax rate is 20%.
What is the Net Present Value of the proposed investment? Use a financial calculator to compute the Present Value of the future cash flows.

Glencore Co Is a Glasses Manufacturing Company