New processing system with installed cost

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Turlock Meats, Inc. is looking at a new processing 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 new system can be scrapped for $100,000. The new processing system will save the firm $150,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $30,000 (which must be maintained for the five years). If the tax rate is 35% and the discount rate is 10%, what is the NPV of the project?

Reference no: EM131982991

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