Solution-What is the npv of buying the new system

What is the npv of buying the new system

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You were hired as a consultant for GB Corp.. GB Corp. is considering replacing a labour intensive process with an automated system that requires 74.0% less labour than the current system. It would cost $902,000 to acquire the new automated system. The cost will be depreciated at a 35% CCA rate. The new machinery has an expected life of 7 years. The system is estimated to have a salvage value of $150,300 at the end of the 7 years. The automated system would save $271,000 per year pre-tax in labour costs. The tax rate is 44% and the required rate of return on projects of this risk is 18%. What is the NPV of buying the new system? This question should take you no more than 20 minutes to answer.

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What is the npv of buying the new system

Reference no: EM133058421

Reference no: EM133058421

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