11. 14.

Project evaluation [LO 10.1] Boolarloo Sausage Shop is looking at a new sausage system with an installed cost of $460 000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $55 000. The sausage system will save the firm $155 000 per year in pretax operating costs and the system requires an initial investment in net working capital of $29 000. If the tax rate is 30 per cent and the discount rate is 10 per cent, what is the NPV of this project?