The Cornchopper Company is considering the purchase of a new harvester.
? The new harvester is not expected to affect revenues, but pretax operating expenses will be reduced by $13,500 per year for 10 years.
? The old harvester is now 5 years old, with 10 years of its scheduled life remaining. It was originally purchased for $72,000 and has been depreciated by the straight-line method.
? The old harvester can be sold for $21,500 today.
? The new harvester will be depreciated by the straight-line method over its 10-year life.
? The corporate tax rate is 40 percent.
? The firm’s required rate of return is 13 percent.
? The initial investment, the proceeds from selling the old harvester, and any resulting tax effects occur immediately.
? All other cash flows occur at year-end.
? The market value of each harvester at the end of its economic life is zero.
Determine the break-even purchase price in terms of present value of the harvester. This break-even purchase price is the price at which the project’s NPV is zero. (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)
Purchase price $