Norcross Fiber Company is considering automating the piece goods screen printing system at a cost of $19,000.
Question:
“Norcross Fiber Company is considering automating the piece goods screen printing system at a cost of $19,000. The firm plans to phase out the new printing system after 5 years due to changes in style. At that time, the firm may scrap the system for $2,000 in today's dollars. Due to automation The expected net savings (income - expenses) are also in today's (constant) dollars: Year 1 $21,000; Year 2 $18,000; Years 3-5 $12,000. The 5-year MACRS property will be depreciated accordingly. The overall inflation rate is 4% per year. Suppose the net savings and scrap value are subject to this inflation rate. The firm's non-inflationary MARR is 15%. The firm's tax rate is 31%. What is the net present value of this automation system?
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon