Question: Amazon is looking at a new vending system with an installed cost of $625,000. This cost will be depreciated straight-line to zero over the projects

Amazon is looking at a new vending system with an installed cost of $625,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the vending system can be scrapped for $95,000. The vending system will save the company $183,000 per year in pre-tax operating costs, and the system requires an initial investment in net working capital of $41,000. The tax rate is 34% and the discount rate is 8%.

What is the NPV?

What is the IRR?

What is the Payback?

Should the company invest? Why?

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