Question: Dog Up Franks is looking at a new sausage system
Dog Up! Franks is looking at a new sausage system with an installed cost of $480,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $70,000. The sausage system will save the firm $160,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project?
Relevant QuestionsYour firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $60,000 at the end of that time. You ...Suppose in the previous problem that LISC always needs a conveyor belt system; when one wears out, it must be replaced. Which project should the firm choose now?Your small remodeling business has two work vehicles. One is a small passenger car used for job-site visits and for other general business purposes. The other is a heavy truck used to haul equipment. The car gets 25 miles ...How do soft rationing and hard rationing differ? What are the implications if a firm is experiencing soft rationing? Hard rationing?Consider a project with the following data: accounting break-even quantity = 13,400 units; cash break-even quantity = 10,600 units; life = five years; fixed costs = $150,000; variable costs = $24 per unit; required return = ...
Post your question