Question
Grapple, Inc. is hooked on the idea of a new investment project. The project requires a machine that costs $160,000 plus $40,000 in setup costs
Grapple, Inc. is hooked on the idea of a new investment project. The project requires a machine that costs $160,000 plus $40,000 in setup costs that will be expensed immediately. Also, $22,000 in additional net working capital will be needed for the project. The project is expected to have an 8-year life, but the machine will be depreciated to a book value of $10,000 over 6 years. The machine is expected to be sold for $15,000 at the end of the 8 years. Revenues minus costs are expected to be $30,000 in the first year, and $60,000 per year in years 2-8. The cost of capital is 14%. The relevant tax rate is 40%. Compute the NPV of the Grapple project.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started