Commodity Copper is considering the installation of a $1,764,000 production conveyor system that would generate the following labor cost savings over its 10-year life: Years Annual Labor Cost Savings 1–2 $280,000 3–5 340,000 6–8 288,800 9–10 260,000 a. The system will have no salvage at the end of its 10-year life, and the company uses a discount rate of 12 percent. What is the pre-tax net present value of this potential investment? Note: Round your final answer to the nearest whole dollar.
Commodity Copper is considering the installation of a $1,764,000 production conveyor system that would generate the following labor cost savings over its 10-year life:
| Years | Annual Labor Cost Savings |
|---|---|
| 1–2 | $280,000 |
| 3–5 | 340,000 |
| 6–8 | 288,800 |
| 9–10 | 260,000 |
a. The system will have no salvage at the end of its 10-year life, and the company uses a discount rate of 12 percent. What is the pre-tax
Note: Round your final answer to the nearest whole dollar.
Net Present Value -
Net present value, or NPV, is used to compute the current total value of a upcoming stream of spending. If the NPV of a assignment or investment is positive, it means that the discounted present worth of all future cash flows associated to that assignment or investment will be positive, and therefore attractive. To compute NPV, you require to approximation future cash flows for each stage and decide the correct discount rate.
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