Question

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Sage is looking at a new system with an installed cost of $400,800. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the system can be scrapped for $60,200. The system will save the firm $180,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $38,500. All of the net working capital will be recovered at the end of the project. The tax rate is 33 percent and the discount rate is 10 percent. What is the net present value of this project? "

Answer 1