(Answered) The machine costs 92000 and depreciation is calculated

Management Studies

The machine costs $92,000 and depreciation is calculated straight line (equal amounts) over 4 years

Every year, the machine increases cash flows by an amount of $34,000 (Taxes, Opportunity Cost etc. have all been accounted for in this number and there is no Net Working Capital)

After 3 years (when the machine has only been depreciated for 3 years and therefore the book value is not zero) the machine is sold for $30,000; therefore, this is a 3 year project

The rate of discount = 9%
The tax rate = 40%

What is the NPV of installing the machinery?

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Business Management, Management Studies

Category:- Business Management
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