Question: A new project involves the purchase of a $ 9 0 0 0 food processing machine. The machine would be depreciated on a straight -

A new project involves the purchase of a $9000 food processing machine. The machine would be depreciated on a straight-line basis over its 3-year useful life to a book value of $817. At the end of the life of the project (at the year 3 point), the machine will be sold for an estimated $1,083. The project will cause an increase in Sales of $5,807 in each of years 1 through 3. It is also expected to enhance efficiencies and reduce operating expenses by $2,528 in each of years 1 through 3. The project will require an increase in Accounts Receivable of $1,457 and an increase in Accounts Payable of $1,580 up front. The project's impact on these accounts is expected to disappear at project end (in year 3). The firm's marginal tax rate is 40%, and its WACC is 12%. The NPV of this project is $_________.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!