In: Finance
Heron Corporation is planning to add manufacturing
capacity by installing new high-tech machines. The machines would
increase revenues by $180,000 per year and increase costs by
$50,000 per year. The new machines cost $560,000 and would be
depreciated over 5 years using simplified straight line. Investment
in net working capital of $30,000 would be required at the time of
installation. The firm is planning to keep the machines for 7 years
and then sell them for $80,000. The firm has a required rate of
return on investment projects of 13% and a tax rate of 21%. What is
the net present value of this project?
a) ($146,055)
d)
($26,209)
b) ($13,457)
e)
($18,015)
c) ($53,073)