eztomheducation.com/hm.tpx?--0.3061151790668266-1S12555671218 * Most Vsted·Getti
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eztomheducation.com/hm.tpx?--0.3061151790668266-1S12555671218 * Most Vsted·Getting Started E My USC Aiken-Black. The T True Story of Poca connect FINANCE all 2017 (AL instructions help Chapter 9 Homework Question for 6 0.00 points Problem 9-13 Project Evaluation [LO 21 ond of which the sausage system can be scrapped is looking at a new sausage system with an inslaled cost of $789,000 This cost will be depreciated straight-ine to zero over the project's sox yeer life, at the syslem wil save the fem $196,000 per year in prelax operating costs, and the system requires an initial rvestment in net Ii the tax rate Is 35 percent and the discount rale is 7 percent NPV working capital of 354,000 what is the NPV of thes praject? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g, 32.16.) References Book & Resources Worksheet Difficulty1 Problem 9-12 Project Evaluation L2] Learning Opctve 002 Anayze projects proe-ed fkwsExplanation / Answer
cost of system
789000
investment in working capital
54000
cash outflow
843000
saving in pre tax operating cost
196000
less depreciation
131500
after depreciation savings
64500
less tax 35%
22575
after tax savings
41925
add depreciation
131500
annual after tax before depreciation savings
173425
annual after tax before depreciation savings in year 6
after tax before depreciation savings+ recovery of investment in working capital+ after tax proceeds from scrap
173425+54000+(108000*(1-.35))
297625
Year
annual savings
present value of annual savings = annual savings/(1+r)^n r= 7%
0
-843000
-843000
1
173425
162079.4
2
173425
151476.1
3
173425
141566.5
4
173425
132305.1
5
173425
123649.6
6
297625
198320.1
net present value
sum of present value of annual savings
66396.84
cost of system
789000
investment in working capital
54000
cash outflow
843000
saving in pre tax operating cost
196000
less depreciation
131500
after depreciation savings
64500
less tax 35%
22575
after tax savings
41925
add depreciation
131500
annual after tax before depreciation savings
173425
annual after tax before depreciation savings in year 6
after tax before depreciation savings+ recovery of investment in working capital+ after tax proceeds from scrap
173425+54000+(108000*(1-.35))
297625
Year
annual savings
present value of annual savings = annual savings/(1+r)^n r= 7%
0
-843000
-843000
1
173425
162079.4
2
173425
151476.1
3
173425
141566.5
4
173425
132305.1
5
173425
123649.6
6
297625
198320.1
net present value
sum of present value of annual savings
66396.84
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