Eco-friendly innovative microgrid controller solutions

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Reference no: EM131896600

Green Energy, a company which provides eco-friendly innovative microgrid controller solutions, is considering the acquisition of a new machine to meet the increased demand of its clients. This project will have 6 years of economic life and the depreciation will take place under the MACRS Tax Depreciation Schedules. The corporate tax rate is equal to 40% and the WACC is 10%. The initial investment includes $100,000 for property plant and equipment, $30,000 installation expenses and $5,000 shipping expenses. Also, there will be a $20,000 inventory increase and $2,000 accounts payable increase. The incremental revenue will be $120,000 and the incremental operating costs will be equal to $60,000 during the 1st,2nd,3rd,4th,5th and 6th year of the project. Also, the expected salvage price of the machine is $20,000 and the terminal book value is equal to $0.

a. Calculate the NPV of the project. Would you pursue or not this project? (Show in detail your calculations in the space below)

Reference no: EM131896600

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