## (Solved) Dog Up! Franks is looking at a new sausage system with an

Dog Up! Franks is looking at a new sausage system with an installed cost of \$430,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for \$60,000. The sausage system will save the firm \$260,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of \$19,000. If the tax rate is 30 percent and the discount rate is 8 percent, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

SolutionFirst we will calculate the annual depreciation of the new equipment. It will be:

Annual depreciation = \$430,000/5

Annual depreciation = \$86,000

Now, we calculate the after-tax salvage...

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This question was answered on: Oct 15, 2019

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