Firm ABC is considering investing in a project to reduce costs by $45,000 annually. The operating costs will also increase by $23,000 each year from the present level. The equipment costs $79,000, had a 4-year life (will be depreciated as a 3-year MACRS asset: 33% for the first year, 45% for the second year, and 15% for the third year), requires $2,000 initial investment in net working capital, and has a salvage value of $20,057. The required rate of return is 12%. Tax rate is 21%. What is the NPV and IRR?

Answer rating: 100% (QA)

the cash out flow for the year 0 is cost of the equipment investment in the working capital 79000200... View the full answer