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Polaroid recently installed new equipment that recycles the solvent, CFC-113 through a closed-loop system. By recycling the CFC-113, which has been implicated in stratospheric ozone
Polaroid recently installed new equipment that recycles the solvent, CFC-113 through a closed-loop system. By recycling the CFC-113, which has been implicated in stratospheric ozone depletion, Polaroid realizes a net savings of $90,000 annually from lower disposal costs and reduced purchases of new solvents. A. If the equipment costs $500,000 and will depreciated straight-line over its eight year life, what is the Polaroids NPV on this investment? Assume 40% corporate tax rate and a 9% discount rate. B. How much would annual savings have to increase for the NPV to turn positive? C. Build a sensitivity table that illustrates how annual savings and discount rates impact NPV.
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