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Jamesbury Valves is considering some new equipment. The equipments price is $900,000, and it would cost another $50,000 to modify it for special use. The
Jamesbury Valves is considering some new equipment. The equipments price is $900,000, and it would cost another $50,000 to modify it for special use. The equipment depreciates straight line to 0 over its 4-year economic life, but will be sold after 3 years for $40,000. The new equipment will have no effect on revenues, but it is expected to save the firm $350,000 per year in before-tax operating costs. Jamesbury's marginal tax rate is 34%, and the managers estimate its cost of capital to be 9%. What is the projects NPV?
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