ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)

ABC is considering the purchase of a $3,000 souffle maker, which has a life of 3 years and will be fully depreciated by the straight-line method. The machine will produce 1,000 souffles per year, with each costing $1 to make and priced at $3. In order for the machine to work, an increase in net working capital of $1,000 is required at the beginning and it will be fully recovered at the end of year 3. The discount rate is 8%. The corporate income tax rate is 40%. Find the NPV of the project. Goal (c)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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