Question
FITCO is considering the purchase of new equipment. The equipment costs $346000, and an additional $109000 is needed to install it. The equipment will be
FITCO is considering the purchase of new equipment. The equipment costs $346000, and an additional $109000 is needed to install it. The equipment will be depreciated straight-line to zero over a 5-year life. The equipment will generate additional annual revenues of $275000, and it will have annual cash operating expenses of $82000. The equipment will be sold for $80000 after 5 years. An inventory investment of $74000 is required during the life of the investment. FITCO is in the 40 percent tax bracket, and its cost of capital is 9 percent. What is the project NPV?
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