2D1B MINTZ CORPORATION IS CONSIDERING THE ACQUISITION OF A NEW TECHNO...
296.
CSO: 2D1b
LOS: 2D1b
Mintz Corporation is considering the acquisition of a new technologically efficient
packaging machine at a cost of $300,000. The equipment requires an immediate, fully
recoverable, investment in working capital of $40,000. Mintz plans to use the machine
for five years, is subject to a 40% income tax rate, and uses a 12% hurdle rate when
analyzing capital investments. The company employs the net present value method
(NPV) to analyze projects.
The overall impact of the working capital investment on Mintz’s NPV analysis is
a.
$(10,392).
b.
$(13,040).
c.
$(17,320).
d.
$(40,000).