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P10-13 Project Evaluation [LO1] Dog Up! Franks is looking at a new sausage system with an...

P10-13 Project Evaluation [LO1]

Dog Up! Franks is looking at a new sausage system with an installed cost of $319,800. This cost will be depreciated straight-line to zero over the project's 6-year life, at the end of which the sausage system can be scrapped for $49,200. The sausage system will save the firm $98,400 per year in pretax operating costs, and the system requires an initial investment in net working capital of $22,960.

  

Required:
If the tax rate is 33 percent and the discount rate is 15 percent, what is the NPV of this project?

Solutions

Expert Solution

NPV of the Project is negative & it is around (2513.87)

Note :

A) Working Capital is recovered at the end of the project

B) Operating Costs before taxes means it is inclusive of the interest and the depreciation charges.

jeff jeffy answered 2 years ago
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