Calculate the npv of investment

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Q Company is considering purchasing a machine upgrade that would have an initial cost of $70,000. They estimate it would add $30,000 to pre-tax revenues and $11,500 to pre-tax operating costs (before taking account of depreciation) per year.

The packaging machine will be depreciated on a straight-line basis, and assumes no salvage value, over 5 years (ignore the MACRS depreciation methodology for this problem.)

Assuming a 19% marginal tax rate, and a 9% WACC, calculate the NPV of this investment.

Do you recommend this project?

Reference no: EM132564858

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