Project Evaluation

Dog Up! Franks is looking at a new sausage system with an installed cost of $889,200. This cost will be depreciated straight-line to zero over the project's 3-year life, at the end of which the sausage system can be scrapped for $136,800. The sausage system will save the firm $273,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $63,840.

Required:

If the tax rate is 33 percent and the discount rate is 14 percent, what is the NPV of this project?

$-174,668.33

$-257,283.34

$-236,533.52

$-195,418.15

$-205,189.05