Intro

Better Tires Corp. is planning to buy a new tire making machine for $90,000 that would save it $40,000 per year in production costs. The savings would be constant over the project's 3-year life. The machine is to be linearly depreciated to zero and will have no resale value after 3 years.

The appropriate cost of capital for this project is 14% and the tax rate is 21%.

Attempt 1/5 for 10 pts.

Part 1

What is the free cash flow in each year of operation (years 1 to 3)?

Submit

Attempt 1/5 for 10 pts.

Part 2

What is the NPV of this project?