Calculate the net cash flow in year

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Reference no: EM131920866

Bates Motel may purchase a water heater to replace an existing water heater. The existing water heater has a $3,000 book value and can be sold for that amount. It has a 3 year remaining life with no salvage value and is depreciated on a S-L basis. The new water heater will save $5,000 a year and cost $16,000. It has a 4-year life with no salvage value and a 4-year depreciation classification. Bates has a 50% tax rate, will apply S-L depreciation and has a required rate of return of 10%. Calculate Co, the net cash flow in year 1 and in year 4. What is the NPV of the project?

Reference no: EM131920866

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