Franks is looking at new sausage system

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Reference no: EM132015249

Dog Up! Franks is looking at a new sausage system with an installed cost of $600,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be resold for $40,000 on the market. The sausage system will save the firm $180,000 per year in pretax operating costs. And, the system requires an initial investment in net working capital of $29,000 and maintains the NWC at such level over the project’s lifetime. This NWC will be recovered at the end of the project. Assume the marginal tax rate is 34%. What is the OCF from the new sausage system?

Reference no: EM132015249

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