Kinky Copies may buy a high-volume copier. The machine costs $100,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $20,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firm's tax rate is 21%, and the discount rate is 8%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Answer is $13789.85

Kinky Copies may buy a high-volume copier. The machine costs $100,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $20,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firm's tax rate is 21%, and the discount rate is 8%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Answer is $13789.85

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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