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Frank is looking at a new sausage system with an installed cost of $560,000. This cost will be depreciated straight line to zero over the
Frank is looking at a new sausage system with an installed cost of $560,000. This cost will be depreciated straight line to zero over the projets five year life, at the end of which the sausages system can be scarpped for $ 85,000. The sausage system will save the firm $ 165,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 30 percent and the discount rate is 10 percent advice Mr Frank whether he should undertake this investment.
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