Problem:
Dog up! Franks is looking at a new sausage system with an installed cost of $560,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $165,000 per year in pretax operating costs, and the system requires and initial investment in net working capital of $29,000.
Required:
Question: If the tax rate is 34% and the discount rate is 10%, what is the NPV of this project?
Note: Please show how you came up with the solution.