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Accounting

Problem:

Kolbys Korndogs is looking at a new sausage system with an installed cost of $882,000. This cost will be depreciated straight-line to zero over the projects seven-year life, at the end of which the sausage system can be scrapped for $97,000. The sausage system will save the firm $185,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $43,000.

Required:

Question: If the tax rate is 30 percent and the discount rate is 6 percent, what is the NPV of this project?

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166835

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