Looking at a new sausage system with an installed cost

Reference no: EM131136865

Kolby's Korndogs is looking at a new sausage system with an installed cost of $777,000. This cost will be depreciated straight-line to zero over the project's six-year life, at the end of which the sausage system can be scrapped for $104,000. The sausage system will save the firm $192,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $50,000.

Required:

If the tax rate is 35 percent and the discount rate is 7 percent, what is the NPV of this project?

Reference no: EM131136865

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