Crane Lumber, Inc., is considering purchasing a new wood saw that costs $80,000. The saw will...

Crane Lumber, Inc., is considering purchasing a new wood saw that costs $80,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,700 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax rate is 34 percent, and its opportunity cost of capital is 17.60 percent.

What is the project's NPV? (Do not round intermediate calculations. Round final answer to the nearest whole dollar, e.g. 5,275.)

Expert Solution

Solution :

The Net present value of the project is = $ 443

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

jeff jeffy answered 2 years ago

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