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Paperless Exams Distributor is considering a four-year project to improve its exam production efficiency. Buying a...
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Paperless Exams Distributor is considering a four-year project to improve its exam production efficiency. Buying a new exam question generator would cost $385,000. It is expected to result in $145,000 in cost savings, per year, before taxes. This piece of equipment would follow the MACRS five-year class depreciation method. Its salvage value at the end of the project is estimated at $45,000. The exam question generator also requires an immediate investment in spare parts inventory of $20,000. It will require additional $3,100 in inventory in each succeeding year of the project. The company's tax rate is 22 percent. The appropriate discount rate is 9 percent. Refer to Table 10.7. |
| Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Should the company buy and install the equipment? |
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No
-
Yes
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