Question
GE Power is installing a new sensor system in its factory for $50,000 that will save $40,000 per year in costly leaks of raw materials.
GE Power is installing a new sensor system in its factory for $50,000 that will save $40,000 per year in costly leaks of raw materials. The savings will grow by 3% each year, concurrent with production growth over 10-year life of the sensor GE Power estimates a 13% cost of capital for the project and has a tax rate of 21%. The company will depreciate the sensor using the straight-line method over its 10-year life and it will have no re-sale value at the end of 10 years. Use this information to calculate the following key pieces of information:
1) The CFFA in year 1. (Exclude the initial investment, just focus on the savings in year 1)
2) The NPV of the entire project (including initial investment)?
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