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Dog Up! Franks is looking at a new sausage system with an installed cost of $504,253....

Dog Up! Franks is looking at a new sausage system with an installed cost of $504,253. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $77,475. The sausage system will save the firm $174,403 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,998. If the tax rate is 36 percent and the discount rate is 11 percent, what is the NPV of this project?

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Expert Solution

Answer:- $57,250.12

Explanation:-

Following is the excel sheet showing the calculation of NPV of the project:-

Following is the Formula Sheet of above excel worksheet for easy understanding of the calculations:-

[ Note:- After tax-salvage value = Market Value ( 1 -Tax rate)

Initial investment in the net working capital will be recovered at the end of year 5 ]

jeff jeffy answered 2 years ago
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