Dog Up! Franks is looking at a new sausage system with an installed cost of $694

Question

Dog Up! Franks is looking at a new sausage system with an installed cost of $694,200. This cost will be depreciated straight-line to zero over the project's 6-year life, at the end of which the sausage system can be scrapped for $106,800. The sausage system will save the firm $213,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $49,840.

   

rev: 09_18_2012

$139,369.92

$173,624.82

$165,356.97

$120,937.58

$183,789.32

Dog Up! Franks is looking at a new sausage system with an installed cost of $694,200. This cost will be depreciated straight-line to zero over the project's 6-year life, at the end of which the sausage system can be scrapped for $106,800. The sausage system will save the firm $213,600 per year in pretax operating costs, and the system requires an initial investment in net working capital of $49,840.

Explanation / Answer

So option e is correct

no of period 6 rate 8% FV 156640 PMT 180314 PV $932,279.69 initial cost -744040 NPV $188,239.69

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