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White Enterprises just invested in a black light health management system at a cost of $600,000. White plans to utilize the equipment for 7 years and expects to sell the system for $75,000 at the end of the 7-year project. Its marginal tax rate is 34 percent and it uses an 8 percent cost of capital to evaluate projects of this nature. The machine falls into the MACRS 7-year class OR it can be depreciated straight-line over 7 years to the $75,000 salvage value.

a. Calculate the NPV of the project if straight line depreciation is used.

b. Calculate the NPV of the project if MACRS depreciation is used.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92663675

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