You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine's base price is $11,000.00, and it would cost another $2,570.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $1,850.00. The machine would require an increase in net working capital (inventory) of $860.00. The new machine would not change revenues, but it is expected to save the firm $26,235.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 36.00%.

If the project's cost of capital is 13.25%, what is the NPV of the project?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the project we need to consider the initial investment ann... View the full answer