A new electronic process monitor costs $880,000 This cost could be depreciated at 30 percent per year (Class 10) The monitor could actually be worthless in 5 years. The new monitor would save us $448,000 per year before taxes and operating costs.

a) If we require a 10 percent return, what is the NPV of the purchase? Assume a tax rate of 33 percent

NPV = $_____

b) in the previous question, suppose the new monitor also requires us to increase net working capital by $39,600 when we buy it. Further suppose that the monitor could actually be worth $120,000 in 5 years. What is the NPV?

NPV = $________

Answer rating: 100% (QA)

a InflowOutflow Year PV factor Present value factor Initial cost 880... View the full answer