In the previous problem, suppose the fixed asset actually qualifies for 100 percent bonus depreciation. All the
Question:
In the previous problem, suppose the fixed asset actually qualifies for 100 percent bonus depreciation. All the other facts are the same. What is the new NPV?
Data from Previous Problem
Cori’s Meats is looking at a new sausage system with an installed cost of $304,000. 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 $30,000. The sausage system will save the firm $116,000 per year in pretax operating costs and the system requires an initial investment in net working capital of $15,000. If the tax rate is 23 percent and the discount rate is 10 percent, what is the NPV of this project?
Step by Step Answer:
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan