Question
I am confused on how to get the book value. Heron Corporation is planning to add manufacturing capacity by installing new high-tech machines. The machines
I am confused on how to get the book value.
Heron Corporation is planning to add manufacturing capacity by installing new high-tech machines. The machines would increase revenues by $180,000 per year and increase costs by $50,000 per year. The new machines cost $560,000 and would be depreciated over 5 years using simplified straight line. Investment in net working capital of $30,000 would be required at the time of installation. The firm is planning to keep the machines for 7 years and then sell them for $80,000. The firm has a required rate of return on investment projects of 13% and a tax rate of 21%. What is the net present value of this project?
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