You plan to purchase a new gas chromatograph for your

Reference no: EM13380995

You plan to purchase a new gas chromatograph for your company's food-product development lab. The machine will cost $300,000 plus $20,000 shipping and installation costs, all of which may be depreciated. Operating the chromatograph will require an inventory of reagents and standards which will cost $10,000 (working capital). This inventory will be sold at the end of four (4) years for $10,000 along with the chromatograph which will be sold at the end of four (4) years for $90,000. The chromatograph will generate revenues of $100,000 per year for the four years. You plan to depreciate the equipment to a book value of zero (0) over the four years using the straight-line method. Assuming that your cost of capital is 11% and that your tax rate is 35%, calculate the NPV of this project.

a. NPV = $3,650.52 IRR = 11.47%

Reference no: EM13380995

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