Marshall Inc., is looking at a new bottle system that costs $379,664. It will cost an additional
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Marshall Inc., is looking at a new bottle system that costs $379,664. It will cost an additional $43,293 to modify the system for special use by the firm. The new equipment is classified as five-year property under MACRS (20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76%).
Suppose the bottle system will be scrapped for $70,609 at the end of year 4.
The new system will increase pre-tax revenues by $249,600 per year, but pre-tax costs will also increase by $40,080 per year.
The system requires an initial investment in net working capital of $39,616. If the tax rate is 32 percent and the discount rate is 6.37 percent, what is the NPV of this project?
Expert Answer:
Time line 0 1 2 3 4 Cost of new machine 536967 Initial working capital 39616 Initial Investment outl... View the full answer
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