Dog Up! Franks is looking at a new sausage system with an installed cost of $530,400....

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Dog Up! Franks is looking at a new sausage system with aninstalled cost of $530,400. This cost will be depreciatedstraight-line to zero over the project's 9-year life, at the end ofwhich the sausage system can be scrapped for $81,600. The sausagesystem will save the firm $163,200 per year in pretax operatingcosts, and the system requires an initial investment in net workingcapital of $38,080.

If the tax rate is 21 percent and the discount rate is 10percent, what is the NPV of this project?

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4.4 Ratings (585 Votes)

Annual depreciation 530400 9 589333333 Initial investment Cost net working capital Initial investment 530400 38080 568480 OCF from year 1 to See Answer

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Dog Up! Franks is looking at a new sausage system with aninstalled cost of $530,400. This cost will be depreciatedstraight-line to zero over the project's 9-year life, at the end ofwhich the sausage system can be scrapped for $81,600. The sausagesystem will save the firm $163,200 per year in pretax operatingcosts, and the system requires an initial investment in net workingcapital of $38,080. If the tax rate is 21 percent and the discount rate is 10percent, what is the NPV of this project?