Dog Up! Franks is looking at a new sausage system with an
installed cost of $733,200....
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Dog Up! Franks is looking at a new sausage system with aninstalled cost of $733,200. This cost will be depreciatedstraight-line to zero over the project's 7-year life, at the end ofwhich the sausage system can be scrapped for $112,800. The sausagesystem will save the firm $225,600 per year in pretax operatingcosts, and the system requires an initial investment in net workingcapital of $52,640.
Required:
If the tax rate is 32 percent and the discount rate is 15percent, what is the NPV of this project?
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Initial Investment for the Project Initial Investment for the Project Cost of the asset Working capital needed 733200 52640 785840 Annual Operating Cash Flow OCF Annual Operating Cash Flow OCF Pretax Savings1 Tax
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