Late in 2010,the Spencer K Corporation has projected the pretax cash flows shown below for a dabblemaster that cost $460,000.If Spencer K Corp's tax rate is 40% and its cost of capital is 14 percent.The projected cash flows and depreciation for the dabblemaster are described below.
Required:
(A.)Calculate the net present value of the dabblemaster given the pretax cash flows and depreciation described above and indicate whether you would recommend purchasing the assets.
(B.)If Spencer K Corp used straight-line depreciation of $94,000 per year for 5 years would your answer be the same?

Question

Late in 2010,the Spencer K Corporation has projected the pretax cash flows shown below for a dabblemaster that cost $460,000.If Spencer K Corp's tax rate is 40% and its cost of capital is 14 percent.The projected cash flows and depreciation for the dabblemaster are described below.
  Required:
(A.)Calculate the net present value of the dabblemaster given the pretax cash flows and depreciation described above and indicate whether you would recommend purchasing the assets.
(B.)If Spencer K Corp used straight-line depreciation of $94,000 per year for 5 years would your answer be the same?

Quizplus · Accepted Answer

The Answer of Late in 2010,the Spencer K Corporation has projected the pretax cash flows shown below for a dabblemaster that cost $460,000.If Spencer K Corp's tax rate is 40% and its cost of capital is 14 percent.The projected cash flows and depreciation for the dabblemaster are described below.
  Required:
(A.)Calculate the net present value of the dabblemaster given the pretax cash flows and depreciation described above and indicate whether you would recommend purchasing the assets.
(B.)If Spencer K Corp used straight-line depreciation of $94,000 per year for 5 years would your answer be the same?

Late in 2010,the Spencer K Corporation Has Projected the Pretax