Project Evaluation
Dog Up! Franks is looking at a new sausage system with an installed cost of $889,200. This cost will be depreciated straight-line to zero over the project's 3-year life, at the end of which the sausage system can be scrapped for $136,800. The sausage system will save the firm $273,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $63,840.
Required:
If the tax rate is 33 percent and the discount rate is 14 percent, what is the NPV of this project?
$-174,668.33
$-257,283.34
$-236,533.52
$-195,418.15
$-205,189.05