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Harriet Harvester (HH) plans to buy a haymaker. It costs $180,000 and is expected to last for five years. She presently hires 10 workers at
Harriet Harvester (HH) plans to buy a haymaker. It costs $180,000 and is expected to last for five years. She presently hires 10 workers at $3,000 per month for each of the six harvesting months each year. The equipment would eliminate the need for six workers. HH uses straight-line depreciation and projects a salvage value of $23,000. Her tax rate is 21% and opportunity cost of funds is 8.0%. Which is true?
A. The present value of cash flows in year 5 is $24,466
B. NPV is -$24,466
C. NPV is $155,534
D. NPV is -$155,534
E. None of the above
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