Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,600 and sell its old washer for $2, 300. The new washer will last for 6 years and save $1,800 a year in expenses. The opportunity cost of capital is 19%, and the firms tax rate is 40%.

a. If the firms uses straight-line depreciation to an assumed salvage value of zero over a 6 year life, what is the annual operating cash flow of the project in years 0 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated.

Annual operating cash flow in year 0

Annual operating cash flow in years 1 to 6

b. What is project NPV? 2 decimal places

NPV:

c. What is NPV if the firm uses MACRS depreciation with a 5-year tax life?

NPV: