Duluth snow removal co is considering purchasing an 825000, Ask an Expert

Finance

Duluth Snow Removal Co. is considering purchasing an $825,000 snow melting machine in order to get a contract with the city. They have estimated that the machine would only last four years at which time it would be scrapped for $50,000. It will be depreciated using MACRS and it falls into the 5-year schedule.

The 4-year project will generate $480,000 in annual revenue and $75,000 in annual costs. The project will require an investment of $20,000 in net working capital. Duluth Snow is in the 30 percent tax bracket and requires a 20 percent return on projects.

What is the project NPV?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92424699

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