Salvage for an after tax salvage cash flow

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Reference no: EM131071446

A company is considering a 3-year project that requires an initial installed equipment cost of $16,000. The project engineer has estimated that the operating cash flows will be $5,000 in year 1, $6,000 in year 2, and $8,000 in year 3. The new machine will also require a parts inventory of $3,000 at the beginning of the project (assume this inventory can be sold for cost at the end of the project). It is also estimated that the equipment can be sold as salvage for an after tax salvage cash flow of $6,000 at the end of the project. If the tax rate is 32% and the required rate of return is 14%, what is the net present value (NPV) of this project?

Reference no: EM131071446

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