Question: XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $46,800. 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 $46,800. 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 $13,500. Without the system, costs are expected to be $100,000 in 1 year and $100,000 in 2 years. With the system, costs are expected to be $77,600 in 1 year and $66900 in 2 years. If the tax rate is 47% and the cost of capital is 8.8% what is the net present value of the new interception system project?

13394 (plus or minus $50)

9735 (plus or minus $50)

14216 (plus or minus $50)

11160 (plus or minus $50)

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