Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system,
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Kerfuffle Corporation is considering the purchase of a new computer system. The cost for the new system, including set-up and delivery costs of $20,000, will be $2 million. The new system will provide annual before-tax cost savings of $650,000 for the next five years. The increased efficiency of the new system will lower net working capital by $150,000 today. The CCA rate on the new system will be 30%. At the end of five years, the system can be salvaged for $125,000. The firm's required rate of return is 15%, and its marginal tax rate is 35%.
What is the NPV of this cost-cutting project?
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
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