The oregon Airlines is thinking of paying $385,000 to acquire new luggage scanning and weighing equipment that
Question:
The oregon Airlines is thinking of paying $385,000 to acquire new luggage scanning and weighing equipment that would make its airport services faster and more cost-efficient. Using this new equipment would save the company $145,000 every year, pre-taxes. This luggage scanning and weighing equipment will follow MACRS five-year property class depreciation schedule. The Oregon Airlines expects to be able to find a buyer who would pay $45,000 when this equipment gets sold at the end of the project. This would be a four-year investment project. $20,000 would be an immediate investment in cash reserve, and the Oregon Airlines foresees the need to increase this cash reserve by $3,100 each year. The oregon pays 22 percent tax rate on its annual taxable income each year. 9 percent is an appropriate discount rate for all future cash flows of this four-year project. Use the information in Table 10.7 when needed. |
Calculate the Net Present Value of this four-year project. (Do not round your intermediate calculations and only round your final answer to 2 decimal places, e.g., 32.16.) |
ANSWER: NPV_____
Should the company buy this new luggage equipment? |
A.Yes
B. No
HERE IS THE TABLE FOR 10.7
Human Resource Management
ISBN: 978-0538453158
13th Edition
Authors: Robert L. Mathis, John H. Jackson