Arbitrary Inc. has is planning to purchase an asset for $1,400,000. The asset is expected to return $180,000 per year for the next 10 years, with a disposal value of $50,000. Arbitrary's required rate of return is 9%, and the applicable tax rate is 20%.
The asset will be depreciated using the 5-Year MACRS rates, with a specific percentage of the original purchase value of the asset recognized as depreciation expense each year, as follows:
What is the NPV of the proposed asset purchase? Use a financial calculator to compute NPV.

Question

Arbitrary Inc. has is planning to purchase an asset for $1,400,000. The asset is expected to return $180,000 per year for the next 10 years, with a disposal value of $50,000. Arbitrary's required rate of return is 9%, and the applicable tax rate is 20%. 
The asset will be depreciated using the 5-Year MACRS rates, with a specific percentage of the original purchase value of the asset recognized as depreciation expense each year, as follows:
  What is the NPV of the proposed asset purchase? Use a financial calculator to compute NPV.

Quizplus · Accepted Answer

The Answer of Arbitrary Inc. has is planning to purchase an asset for $1,400,000. The asset is expected to return $180,000 per year for the next 10 years, with a disposal value of $50,000. Arbitrary's required rate of return is 9%, and the applicable tax rate is 20%. 
The asset will be depreciated using the 5-Year MACRS rates, with a specific percentage of the original purchase value of the asset recognized as depreciation expense each year, as follows:
  What is the NPV of the proposed asset purchase? Use a financial calculator to compute NPV.