Question

#36

Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $15.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.47 million per year and increased operating costs of $641,571.00 per year. Caspian Sea Drinks' marginal tax rate is 22.00%. If Caspian Sea Drinks uses a 10.00% discount rate, then the net present value of the RGM-7000 is _____.

Answer 1

Solution :

The net present value of the RGM-7000 is = $ 5,187,146.22

= $ 5,187,146 ( when rounded off to the nearest whole number )

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