Compute the npv of the project

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Question - A machine costs $750 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the new US corporate tax code of 2018.

This company has current pre-tax profits from other projects that are greater than $750, so it can take full advantage of the investment tax break above in year 0.        

The machine will generate operating profits before depreciation (EBITDA) of $312 per year for 5 years. The first cash flow happens one year after the machine is put in place (year 1).        

Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes.        

The tax rate is 21%        

There is no salvage value at the end of the five years (the machine is worthless), and no required working capital investment.        

Required - Compute the NPV of the project if the discount rate is 9%.

Reference no: EM133155461

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