Kinky Copies may buy a high-volume copier. The machine costs $130,000 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 $22,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $11,000. The firm's tax rate is 21%, and the discount rate is 6%. (Assume the networking capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. NPV
Kinky Copies may buy a high-volume copier. The machine costs $130,000 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 $22,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $11,000. The firm's tax rate is 21%, and the discount rate is 6%. (Assume the networking capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. NPV
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...
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