Question

Dog Up! Franks is looking at a new sausage system with an installed cost of $343,200. 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 $52,800. The sausage system will save the firm $105,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $24,640. If the tax rate is 21 percent and the discount rate is 11 percent, what is the NPV of this project?

Multiple Choice :

a) $118,517.97

b) $85,655.10

c) $98,427.03

d) $111,033.33

e) $105,746.03

Answer 1

Solution :

The NPV of the project = $ 105,746.03

The solution is Option e) $ 105,746.03

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.