Recycle the silver used in photographic film

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Reference no: EM131852878

Photographic laboratories recover and recycle the silver used in photographic film. Stikine River Photo is considering a purchase of improved equipment for their laboratory at Telegraph Creek. Here is the information they have:

• The equipment costs $107,000 and will cost $85,600 per year to run.

• It has an economic life of 10 years but can be depreciated over five years by the straight-line method.

• It will recover an additional 5,000 ounces of silver per year.

• Silver is selling for $24 per ounce. Over the past 5 years, the price of silver has appreciated by 4.5% per year in real terms. Silver is traded in an active, competitive market.

• Stikine's marginal tax rate is 34%. Assume U.S. tax law.

• Stikine's company cost of capital is 6% in real terms.

• The nominal interest rate is 4%.

What is the NPV of the new equipment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131852878

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