Question: Hi, Could you please explain the answer, especially how to compute the NPV. I am not really understand Question Answer 14. Project

Hi,

Could you please explain the answer, especially how to compute the NPV.

I am not really understand

Question

14. Project Evaluation Dog Up! Franks is looking at a new sausage

Answer

system with an installed cost of $385,000. This cost will be depreciated

14. Project Evaluation Dog Up! Franks is looking at a new sausage system with an installed cost of $385,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $60,000. The sausage system will save the firm $135,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project?

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