Question: XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $46,400.00. It would be depreciated straight-line to

XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $46,400.00. It would be depreciated straight-line to $0 over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $14,400.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $75,200.00 in 1 year and $67,900.00 in 2 years. If the tax rate is 46.60% and the cost of capital is 8.60%, what is the net present value of the new interception system project?

$15248.43 (plus or minus $50)

$16026.88 (plus or minus $50)

$11659.95 (plus or minus $50)

$12994.24 (plus or minus $50)

None of the above is within $50 of the correct answer

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