Question
ABC is thinking about buying a kiln that costs $27,000. ABC will use the kiln for five years, and expects to be able to sell
ABC is thinking about buying a kiln that costs $27,000. ABC will use the kiln for five years, and expects to be able to sell it as scrap at the end of the five year period for $2,000. The kiln won't add any revenues, but it is more efficient than the existing kiln, so it is expected that it would save the firm $15,651 the first year, $9,484 the second year, $8,578 the third year, $4,112 the fourth year, and $3,043 the fifth and final year. The kiln would be depreciated using standard 3-year MACRS percentages (33%, 45%, 15%, and 7%). ABC's cost of capital is 12 percent. Given that information, what is the NPV of this potential project?
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