Problemkolbys korndogs is looking at a new sausage system, Ask an Expert

Accounting

Problem:

Kolby's Korndogs is looking at a new sausage system with an installed cost of $522,000. This cost will be depreciated straight-line to zero over the project's four-year life, at the end of which the sausage system can be scrapped for $106,000. The sausage system will save the firm $194,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $52,000.

Required:

Question: If the tax rate is 40 percent and the discount rate is 9 percent, what is the NPV of this project?

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168871

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