Chapter 9
	Question 14
	Project Evaluation Kolbys Korndogs is looking at a new sausage system with an installed cost of $740,000. This cost will be depreciated straight-line to zero over the projects seven-year life, at the end of which the sausage system can be scrapped for $102,000. The sausage system will save the firm $217,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $69,000. What is the aftertax salvage value of the equipment? What is the annual operating cash flow? If the tax rate is 22 percent and the discount rate is 9 percent, what is the NPV of this project?
	Installation cost	$ 740,000
	*Depreciation straight-line
	over life	7
	Pretax salvage value	$ 102,000
	Operating cost per year	$ 217,000
	Initial NWC	$ 69,000
	Tax rate	22%
	Discount rate	9%
	Output area:
	Annual depreciation charge	$ 105,714		<--Answer needed here
	Aftertax salvage value	$ 79,560		<--Answer needed here
	OCF			<--Answer needed here
	Year	Cash flow
	0			<---Data needed here
	1			<---Data needed here
	2			<---Data needed here
	3			<---Data needed here
	4			<---Data needed here
	5			<---Data needed here
	6			<---Data needed here
	7			<---Data needed here
	NPV			<---Must use NPV fx for credit consideration here