A company is considering purchasing an asset for $50,000 that would have a useful life of 8 years and would have a salvage value of $7,000. For tax purposes, the entire original cost of the asset would be depreciated over 8 years using the straight-line method and the salvage value would be ignored. The asset would generate annual net cash inflows of $18,000 throughout its useful life. The project would require additional working capital of $2,000, which would be released at the end of the project. The company's tax rate is 30% and its discount rate is 15%.
Required:
What is the net present value of the asset?

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The Answer of A company is considering purchasing an asset for $50,000 that would have a useful life of 8 years and would have a salvage value of $7,000. For tax purposes, the entire original cost of the asset would be depreciated over 8 years using the straight-line method and the salvage value would be ignored. The asset would generate annual net cash inflows of $18,000 throughout its useful life. The project would require additional working capital of $2,000, which would be released at the end of the project. The company's tax rate is 30% and its discount rate is 15%.
Required:
What is the net present value of the asset?

A Company Is Considering Purchasing an Asset for $50,000 That