Problem:

Kolby's Korndogs is looking at a new sausage system with an installed cost of $665,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $111,000. The sausage system will save the firm $199,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $57,000.

Required:

Question: If the tax rate is 34 percent and the discount rate is 8 percent, what is the NPV of this project?

Note: Please describe comprehensively and provide step by step solution.