Maritimes Toy Corporation (MTC)is considering investing in a piece of new equipment worth $50,000.The equipment will increase operating revenue by $10,000 per year for ten years.The equipment is expected to have no salvage value at the end of ten years,and capital cost allowance is claimed at 20 percent on a declining balance.The corporate tax rate is 38 percent,and MTC's opportunity cost of capital is 9 percent.Assume the asset class remains open after the asset is sold.The project's NPV is closest to:

Question

Quizplus · Accepted Answer

CF₀ = $50,000,PV(CFAT)= $10,000*(1 - 38%)*PVAF(9%,10)= $39,789.48 11ea8229_3476_4eaf_bbd8_3195f140635d_TB1726_00 NPV = -$50,000 + $39,789.48 + $12,562.48 = $2,351.96

Maritimes Toy Corporation (MTC)is Considering Investing in a Piece of New