Given the following information for the Share-Pei Boutique Corporation, calculate the NPV of a New Machine and

Question:

Given the following information for the Share-Pei Boutique Corporation, calculate the NPV of a New Machine and whether the investment should be made: cost = $7,500; installation cost is $1,500, and a net increase of net working capital of $1,000, estimated life of the machine is = 3 years; estimated salvage value = $1,000; net income before taxes and depreciation = $2,000 per year; method of depreciation = MACRS: tax rate = 40%; required rate of return = 15%?

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...