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The local franchise of Jiffy Lube is thinking of buying a new lift for $70,000 that would make it easier to access the oil filter
The local franchise of Jiffy Lube is thinking of buying a new lift for $70,000 that would make it easier to access the oil filter in customers' cars and save labor. The savings would increase over the project's 3-year life, in line with the projected growth of the business:
A | B | C | D | |
1 | Year | 1 | 2 | 3 |
2 | Cost savings | 60,000 | 66,000 | 79,200 |
The machine is to be linearly depreciated to zero and will have no resale value after 3 years. The company uses a discount rate of 16% and has a tax rate of 21%.
What is the free cash flow in year 3?
What is the NPV?
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