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Riverview Company is evaluating the proposed acquisition of anew production machine. The machine's base price is $200,000, andinstallation costs would amount to $28,000. Also, $10,000 in networking capital would be required at installation. The machine willbe depreciated for 3 years using simplified straight linedepreciation. The machine would save the firm $110,000 per year inoperating costs. The firm is planning to keep the machine in placefor 2 years. At the end of the second year, the machine will besold for $50,000. Riverview has a cost of capital of 12% and amarginal tax rate of 34%. What is the NPV of the project? Answer is-$16,752 but how do I get that?
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