Question

Dog Up! Franks is looking at a new sausage system with an installed cost of $257,400. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the sausage system can be scrapped for $39,600. The sausage system will save the firm $79,200 per year in pretax operating costs, and the system requires an initial investment in net working capital of $18,480.

  

Required:

If the tax rate is 35 percent and the discount rate is 13 percent, what is the NPV of this project?

rev: 09_18_2012

$-44,427.56

$-37,281.69

$-30,072.77

$-21,494.86

$-28,640.73

Answer 1