New monitor requires to increase net working capital

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Reference no: EM131207978

A new electronic process monitor costs $990,000. This cost could be depreciated at 30 percent per year (Class 10). The monitor would actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. Suppose the new monitor requires to increase net working capital by $47,200 when we buy it. If we require a 15 percent return, and what is the NPV of the purchase? Assume a tax rate of 40 percent.

Reference no: EM131207978

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