Sud Inc
Subject:AccountingPrice: Bought3
Sud Inc. is considering investing in a new machine that will cost $225,000. The machine is projected to generate positive end-of-year cash flows of $77,175 per year for the next seven years. Sud's tax rate is 44%.
Required:
a) Assume Sud's WACC is 6% and that the project has the same risks as Sud's regular business. Calculate the NPV of the project ignoring the CCA and salvage.
b) Sud wants to estimate the sensitivity of the project's NPV to the discount rate selected. Calculate the NPV of the project ignoring the CCA and salvage, and use a discount rate of 12%.
