2. 22.

NPV and bonus depreciation [LO 10.1] Eneabba Hats is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $425 000 and will be eligible for 100 per cent bonus depreciation. The equipment can be sold for $25 000 at the end of the project in five years. Sales would be

$275 000 per year, with annual fixed costs of $47 000 and variable costs equal to 35 per cent of sales. The project would require an investment of $25 000 in NWC that would be returned at the end of the project. The tax rate is 30 per cent and the required return is 9 per cent.

What is the project’s NPV?