Question
Kinky Copies may buy a high-volume copier. The machine costs $150,000 and will be depreciated straight-line over 5 years to a salvage value of $26,000.
Kinky Copies may buy a high-volume copier. The machine costs $150,000 and will be depreciated straight-line over 5 years to a salvage value of $26,000. Kinky anticipates that the machine actually can be sold in 5 years for $37,000. The machine will save $26,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $13,000. The firms marginal tax rate is 35%, and the discount rate is 7%. (Assume the net working capital will be recovered at the end of Year 5.) |
Calculate the NPV.(Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) |
NPV | $ |
Should Kinky buy the machine? | ||
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started