Project Evaluation. Kolbys Korndogs is looking at a new sausage system with an installed cost of $735,000. This cost will be depreciated straight-line to zero over the projects 5 year life, at the end of which the sausage system can be scrapped for $105,000. The sausage system will save the firm $204,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 34%, and the discount rate is 8%, what is the NPV of this project?

Operating Cash Flow =	(Annual savings)(1-T)		+	(Depreciation *T)
			+			=
After Tax Salvage Value =	Sales proceeds	-	tax on gain
		-		=
Year	0	1	2	3	4	5
Cash flows:
Purchase price
Change in NWC
Operating Cash Flow
After tax salvage value
Total Cash Flows
PV of Cash Flows
Net Present Value of Project =