Kolby’s Korndogs is looking at a new sausage system with an installed cost of $655,000. This...

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Kolby’s Korndogs is looking at a new sausage system with aninstalled cost of $655,000. This cost will be depreciatedstraight-line to zero over the project’s five-year life, at the endof which the sausage system can be scrapped for $107,000. Thesausage system will save the firm $195,000 per year in pretaxoperating costs, and the system requires an initial investment innet working capital of $53,000.
What is the aftertax salvage value of the equipment?
Aftertax salvage value $ What is the annual operating cashflow?
OCF $ If the tax rate is 34 percent and the discount rate is 8percent, what is the NPV of this project?

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Solution The after tax salvage value of the equipment 70620The annual operating cash flow each year is as followsInitial See Answer

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Kolby’s Korndogs is looking at a new sausage system with aninstalled cost of $655,000. This cost will be depreciatedstraight-line to zero over the project’s five-year life, at the endof which the sausage system can be scrapped for $107,000. Thesausage system will save the firm $195,000 per year in pretaxoperating costs, and the system requires an initial investment innet working capital of $53,000.What is the aftertax salvage value of the equipment?Aftertax salvage value $ What is the annual operating cashflow?OCF $ If the tax rate is 34 percent and the discount rate is 8percent, what is the NPV of this project?