A special-purpose machine tool set would cost $20,000. The tool set will be financed by a $10,000

Question:

A special-purpose machine tool set would cost $20,000. The tool set will be financed by a $10,000 bank loan repayable in two equal annual installments at 10% compounded annually. The tool is expected to provide annual (material) savings of $30,000 for two years and is to be depreciated by the MACRS three-year recovery period. The tool will require annual O&M costs in the amount of $5,000. The at the end of the two years is expected to be $8,000. Assuming a marginal tax rate of 40% and of 15%, what is the net present worth of this project? You may use Table P10.19 as a worksheet for your calculation.
TABLE PI0.I9

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...