Problemdog up franks is looking at a new sausage system, Ask an Expert

Finance

Problem:

Dog up! Franks is looking at a new sausage system with an installed cost of $560,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $165,000 per year in pretax operating costs, and the system requires and initial investment in net working capital of $29,000.

Required:

Question: If the tax rate is 34% and the discount rate is 10%, what is the NPV of this project?

Note: Please show how you came up with the solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162912

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