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Kinky Copies may buy a high-volume copier. The machine costs $60,000 and will be depreciated straight-line over 5 years to a salvage value of $10,000. Kinky anticipates that the machine actually can be sold in 5 years for $22,000. The machine will save $10,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $5,000. The firm’s marginal tax rate is 35%, and the discount rate is 11%. (Assume the net working capital will be recovered at the end of Year 5.) Calculate the NPV. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $ Should Kinky buy the machine? Yes No

Financial Management, Finance

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