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Woodpecker Pipeline (WPP) is a contracting company that lays oil pipeline infrastructure. WPP is considering...

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Accounting

Woodpecker Pipeline (WPP) is a contracting company that lays oil pipeline infrastructure. WPP is considering purchasing a piece of excavating equipment worth $4,500,000. The machine would generate a net $250,000 yearly pre-tax cash flows. The machine would be depreciated over the course of 20 years, at which time it is predicted to have a disposal value of $1,500,000. Management plans to depreciate the full value of the asset (not deducting the anticipated disposal value in the calculation), and will take a full year of depreciation the first year. WPPs tax rate is 35%, and the discount rate is 12%. What is the Net Present Value of the proposed purchase?

A) ($2,596,919.35) B) $0.00 C) $982,450.35 D) $1,735,876.92 E) $2,350,000

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