What is the npv of the transaction

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Question - You contacted ABC Consulting to look into the possibility of increasing your sales. This is a great concept, according to ABC consulting. You paid the ABC Consulting business $150,000 for their services. They decide to proceed with the project, based on the ABC consultant report. The new equipment will cost you $756,000. This price may be discounted at a rate of 30% per year. In five years, the equipment would be worth $52,000. Before taxes and running costs, the new equipment will yield a profit of $325,000 per year. Let's say the new equipment necessitates a $15,000 increase in networking capital at the time of purchase. What is the NPV of the transaction if we require a 15% return? Assume that the tax rate is 40%.

Reference no: EM133092624

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