question 1:

Dog Up! Franks is looking at a new sausage system with an installed cost of $748,800. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the sausage system can be scrapped for $115,200. The sausage system will save the firm $230,400 per year in pretax operating costs, and the system requires an initial investment in net working capital of $53,760.

If the tax rate is 24 percent and the discount rate is 8 percent, what is the NPV of this project?

question 2:

Consider an asset that costs $255,200 and is depreciated straight-line to zero over its 13-year tax life. The asset is to be used in a 7-year project; at the end of the project, the asset can be sold for $31,900.

If the relevant tax rate is 25 percent, what is the aftertax cash flow from the sale of this asset?