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

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?

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Kolby’s Korndogs is looking at a new sausage system with an installed cost of $655,000. This cost will be depreciated straightline to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $183,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 22 percent and the discount rate is 8 percent, what is the NPV of this project?

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