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Dog Up! Franks is looking at a new sausage system with an installed cost of $702,000....

Dog Up! Franks is looking at a new sausage system with an installed cost of $702,000. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the sausage system can be scrapped for $108,000. The sausage system will save the firm $216,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $50,400. Required: If the tax rate is 32 percent and the discount rate is 15 percent, what is the NPV of this project?

a. $70,205.08

b. $38,752.31

c. $40,689.92

d. $11,143.49

e. $42,596.26

Solutions

Expert Solution

Answer:- Option (b): $38,752.31

Explanation:-

Following is the Excel Sheet showing the calculation of NPV of the project:-

Following is the Formula Sheet of above Excel sheet for easy understanding of the formulas used:-

jeff jeffy answered 2 years ago
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