Question: WP Company is considering purchasing a machine upgrade that would have an initial cost of $68,000. They estimate it would add $31,000 to pre-tax revenues

WP Company is considering purchasing a machine upgrade that would have an initial cost of $68,000. They estimate it would add $31,000 to pre-tax revenues and $11,800 to pre-tax operating costs (before taking account of depreciation) per year.

The packaging machine will be depreciated on a straight-line basis and assumes no salvage value, over 5 years (ignore the MACRS depreciation methodology for this problem.)

Assuming a 21% marginal tax rate, and an 11% WACC, calculate the NPV of this investment.

Do you recommend this project? Why?

Please show all the work on Excel spreadsheet!

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