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Calculate the npv of the new equipment

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Lambo Ltd wishes to install automated inventory monitoring and handling equipment at a cost of R2.4 million. This will result in an improvement in the supply chain process. This is expected to result in before tax annual savings of R900 000 for six years. The expected residual value in 6 years' time is expected to be zero due to expected advances in technology. SARS will allow the company to depreciate the equipment on a straight-line basis over 6 years. The company's cost of capital is 12% and the corporate tax rate is 28%. Calculate the NPV of the new equipment using the net present value method.

Reference no: EM133070793

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