Kolby's Korndogs is looking at a new sausage system with an installed cost of $690,000 The asset qualifies for 100 percent bonus depreciation and can be scrapped for $92,00 at the end of the project's 5-year life. The sausage system will save the firm $224,000 per year in pretax operating costs, and the system requires an initial investment in ne working capital of $49,000. If the tax rate is 22 percent and the discount rate is 1 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

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
Problem 1PS
icon
Related questions
icon
Concept explainers
Topic Video
Question
Kolby's Korndogs is looking at a new sausage system with an installed cost of $690,000.
The asset qualifies for 100 percent bonus depreciation and can be scrapped for $92,000
at the end of the project's 5-year life. The sausage system will save the firm $224,000
per year in pretax operating costs, and the system requires an initial investment in net
working capital of $49,000. If the tax rate is 22 percent and the discount rate is 11
percent, what is the NPV of this project? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
NPV
Transcribed Image Text:Kolby's Korndogs is looking at a new sausage system with an installed cost of $690,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $92,000 at the end of the project's 5-year life. The sausage system will save the firm $224,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $49,000. If the tax rate is 22 percent and the discount rate is 11 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education