Kolby’s Korndogs is looking at a new sausage system with an installed cost of $720,000. This...

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $720,000. 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 $98,000. The sausage system will save the firm $209,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $61,000.

What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

What is the annual operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

If the tax rate is 23 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

jeff jeffy answered 1 year ago

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $720,000. The...

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $720,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $98,000 at the end of the project’s 5-year life. The sausage system will save the firm $209,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $61,000. If the tax rate is 23 percent and the discount rate is 9 percent, what is...

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