Question
Please review the below question and help with the formula and solution. New York Police Service is considering installing a new air conditioning system that
Please review the below question and help with the formula and solution. New York Police Service is considering installing a new air conditioning system that will cost $700,000. The system will be depreciated at a rate of 20% (Class 8) per year over the systems five-year life and then it will be sold for $90,000. The new system will save $250,000 per year in pre-tax operating costs. An initial investment of $70,000 will have to be made in working capital. The tax rate is 35% and the discount rate is 10%. Calculate the NPV of the new refrigeration system. What are the finance details to be presented at the next board meeting?
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