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A company is buying a new system. It would cost $600,000 today. Depreciate straight line to $0 over 2 years, and hauled away for nothing,
A company is buying a new system. It would cost $600,000 today. Depreciate straight line to $0 over 2 years, and hauled away for nothing, so the after-tax cash flow would be $0 in year 2. The system is expected to reduce costs by 400,000 in year 1 and 400,000 in year 2. If the tax rate is 30% and the cost of capital is 10% what is the NPV of the system?
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