Speed Queen Laundromat faces a 40% tax rate and uses a 12.7% discount rate. Speed Queen is purchasing a new $49,800  touchscreen laundry system that will raise annual sales by $5,800 and lower annual operating costs by $14,300. This system, which will have no salvage value, is expected to have a 7-year life and will be depreciated (straight-line) to zero. What is the NPV of purchasing the new laundry system? a. −$14,329 b. $5,148 c. $16,742 d. $23,094 e. −$1,204

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
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Speed Queen Laundromat faces a 40% tax rate and uses a 12.7% discount rate. Speed Queen is purchasing a new $49,800  touchscreen laundry system that will raise annual sales by $5,800 and lower annual operating costs by $14,300. This system, which will have no salvage value, is expected to have a 7-year life and will be depreciated (straight-line) to zero. What is the NPV of purchasing the new laundry system?

a. −$14,329

b. $5,148

c. $16,742

d. $23,094

e. −$1,204

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