Costof disposing waste --> historical cost is 2.25 million peryr Opportunityto s
ID: 2770497 • Letter: C
Question
Costof disposing waste --> historical cost is 2.25 million peryr
Opportunityto sign 10yr contract to guarantee this cost
Ownerof company discovered a way to purifying this (therefore notneeding the landfill). 60% of the waste they normally dispose willbe reused.
Currentcost of machinery is 11.25mill, with allowable installation costsof 200,000
Purifierhas expected life of 10yrs, and components can be salvaged for5,000,000
Class10item, but special 40% to this asset(instead of normaly 30%)
Tax rate is 34%, cost of capital is 12%
Debt is currently selling to yield investors 13%, return requiredby equity holders is 14.28%.
Project requires an incremental investment into NWC of 150,000which 80% can be recouped at end of project
Costs w/ purifying technology:
Questions:
Explanation / Answer
I dont understand how i setup this question. Like the beginning 2steps is where im lost, i should be able to find my way after!