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What is the net present value of the new oven project

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Reference no: EM132032598

Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 20,800 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 1,900 dollars. Without the new oven, costs are expected to be 10,400 dollars in 1 year and 17,400 in 2 years. With the new oven, costs are expected to be -3,800 dollars in 1 year and 9,800 in 2 years. If the tax rate is 50 percent and the cost of capital is 6.28 percent, what is the net present value of the new oven project?

Reference no: EM132032598

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