What is the net present value of the new oven project

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Reference no: EM131549089

Fairfax Pizza is considering buying a new, high efficiency oven. The new oven would be purchased today for 15,000 dollars. It would be depreciated straight-line to 2, 200 dollars over 2 years. In 2 years, the oven would be sold for an after-tax cash flow of 3, 300 dollars. Without the new oven, costs are expected to be 10, 100 dollars in 1 year and 17, 900 in 2 years. With the new oven, costs are expected to be 1, 300 dollars in 1 year and 14, 200 in 2 years. If the tax rate is 50 percent and the cost of capital is 10.9 percent, what is the net present value of the new oven project?

Reference no: EM131549089

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