What is the net present value of new oven project

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Reference no: EM132033201

Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 15,600 dollars. It would be depreciated straight-line to 1,200 dollars over 2 years. In 2 years, the oven would be sold for an after-tax cash flow of 2,200 dollars. Without the new oven, costs are expected to be 12,800 dollars in 1 year and 18,900 in 2 years. With the new oven, costs are expected to be 2,400 dollars in 1 year and 16,200 in 2 years. If the tax rate is 50 percent and the cost of capital is 8.63 percent, what is the net present value of the new oven project?

Reference no: EM132033201

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