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What is the NPV to the nearest dollar

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Question - A company is considering the purchase of equipment costing $84000 which will permit it to reduce its existing labour cost by $23000 each year for 6years. The company estimates that it will have to spend $2000 every two years overhauling the equipment. The equipment may be depreciated using straight line depreciation over 6 years for tax purposes. The company tax rate is 30 cents in the dollar and the after corporate tax cost of capital is 10% per annum.

Assume: Salvage value of zero.

The outlay of $84000 occurs at time zero.

All other cash flows including, tax payments and credits are made at the end of the year.

No overhaul is required in year 6.

Required - What is the NPV to the nearest dollar?

Reference no: EM132731167

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