Initial investment in net working capital

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Reference no: EM13123533

Franks is looking at a new sausage system with an installed cost of $834,600. This cost will be depreciated straight-line to zero over the project's 8-year life, at the end of which the sausage system can be scrapped for $128,400. The sausage system will save the firm $256,800 per year in pretax operating costs, and the system requires an initial investment in net working capital of $59,920.

Required:

If the tax rate is 32 percent and the discount rate is 8 percent, what is the NPV of this project?

a) $407,918.83

b) $399,390.33

c) $333,199.78

d) $360,746.87

e) $380,371.74

Reference no: EM13123533

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