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Dog Up! Franks is looking at a new sausage system with an installed cost of $290,000. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the sausage system can be scrapped for $90,000. The sausage system will save the firm $205, 000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $20,000. If the tax rate is 32 percent and the discount rate is 9.9 percent, what is the NPV of this project?

Dog Up! Franks is looking at a new sausage system with an installed cost of $290,000. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the sausage system can be scrapped for $90,000. The sausage system will save the firm $205, 000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $20,000. If the tax rate is 32 percent and the discount rate is 9.9 percent, what is the NPV of this project?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Dog Up! Franks is looking at a new sausage system with an installed cost of $290,000. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the sausage system can be scrapped for $90,000. The sausage system will save the firm $205, 000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $20,000. If the tax rate is 32 percent and the discount rate is 9.9 percent, what is the NPV of this project?
Transcribed Image Text:Dog Up! Franks is looking at a new sausage system with an installed cost of $290,000. This cost will be depreciated straight-line to zero over the project's 4-year life, at the end of which the sausage system can be scrapped for $90,000. The sausage system will save the firm $205, 000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $20,000. If the tax rate is 32 percent and the discount rate is 9.9 percent, what is the NPV of this project?
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