QUESTION 17 Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new p Cost of new equipment 190,000 Installation cost of equipment $40,000 Life of equipment 5 years, Swaight line depreciation Expected sales: $170,000 per year Expected reduction in sales gmeric product as customers shift to the new line: $10,000 per year Raw material cost $90,000 per year New worker salary: $20,000 per year Required Not working capital over t Expected Salvage value of equipment Tax rate: 35% Assuming a WACC of 13%, what is this project's NPV? Oa-5,068 Ob.6610 Oc. 12,703 O d. 17,756 Oe. 25,294 life of the project: $20,000 at the end of 5 year: $30,000 tails of the investment

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Page 266 MINICASE Flowton Products enjoys a steady demand for stainless steel infiltrators used in a number of chemical processes. Revenues from the infiltrator division are $50 million a year, and production costs are $47.5 million. However, the 10 high-precision Munster stamping machines that are used in the production process are coming to the end of their useful life. One possibility is simply to replace each existing machine with a new Munster. These machines would cost $800,000 each and would not involve any additional operating costs. The alternative is to buy 10 centrally controlled Skilboro stampers. Skilboros cost $1.25 million each, but compared with the Munster, they would produce a total saving in operator and material costs of $500,000 a year. Moreover, the Skilboro is sturdily built and would last 10 years, compared with an estimated seven-year life for the Munster. Analysts in the infiltrator division have produced the accompanying summary table, which shows the…

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