Question 6 - Self Study - No solution. A company is considering whether to invest in a new item of equipment. The equipment would cost $120,000 and have a useful life of four years, after which it would be disposed of for $45,000. The equipment will reduce running costs by $50,000 each year (before taxation). Taxation is at the rate of 30%. The equipment would attract tax-allowable depreciation of 25% each year, by the reducing balance method. Taxation cash flows occur one year in arrears of the cost or benefit to which they relate. The cost of capital is 11% (after tax). Required Calculate the NPV of the project and recommend whether the investment in the project is worthwhile