NPV Calculation for LEZ Enterprises

NPV Calculation for LEZ Enterprises for \$5 Only (Instant Download)

LEZ Enterprises, Inc. has been considering the purchase of a new manufacturing facility for \$700,000. The facility is to be depreciated on a straight line basis over 14 years. It is expected to have no value after those 14 years. Cash flow from depreciation are considered to be risk-free and so they should be discounted at the risk-free rate. Operating revenues from the facility are expected to be \$160,000 during the first year. The revenues are expected to increase at the rate of 2.2% per year which is also expected to be the inflation rate. Production costs in the first year are \$25,000 and they are expected to remain constant each year. The project ends after 14 years. LEZ’s cost of capital is 15%. Its corporate tax rate 21%. The risk-free rate 3%. What is the NPV of this project?

This answer is available in the Excel file.

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Depreciation Calculation

Depreciation Calculation

Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost \$52,000 and has an estimated useful life of four years and an estimated salvage value of \$8,000.

Calculate deprecation expense for each year of the truck’s life using straight- line depreciation.

Using straight- line depreciation method, what is the book value of the truck at the end of the third year of its life?