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2.7.e - cost-saving project valuation: You are considering a new piece of equipment to improve efficiency...

2.7.e - cost-saving project valuation: You are considering a new piece of equipment to improve efficiency at your plant. Specifically, you have the opportunity to purchase a drill press for $640,000 which will result in an estimated annual pre-tax savings of $270,000 for four years. Based on the anticipated salvage sale price and changes in net working capital, you estimate FCFI and FCFO as follows: _yr0_ _yr1_ _yr2_ _yr3_ _yr4_ FCFI -$650,000 -$5,000 -$4,000 -$4,000 $75,000 FCFO $200,000 $200,000 $200,000 $200,000 Your tax rate is 35 percent and the appropriate discount rate for this project is 14 percent. What is the NPV of this project? -$236,975 None of these values are correct. -$33,015 $212,000

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