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Terry Malloy is trying to decide whether his shipping company should invest in a new boat. The new boat will cost $200,000 and it will be fully-depreciated on a straight-line basis over its 10-year useful life. The new boat will have no salvage value. The new boat is expected to increase EBITDA by $50,000 per year for 10 years. What is the NPV of this investment if the corporate income tax rate is 50 percent and the cost of capital is 10 percent?

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Terry Malloy is trying to decide whether his shipping company should invest in a new boat.  The new boat will

cost $200,000 and it will be fully-depreciated on a straight-line basis over its 10-year useful life.  The new boat will have no salvage value.  The new boat is expected to increase EBITDA by $50,000 per year for 10 years.  What is the NPV of this investment if the corporate income tax rate is 50 percent and the cost of capital is 10 percent?

 
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