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2. You are considering investing in a process that promises to save you $8000 per year, pre-tax. The process has an expected life of 5
2. You are considering investing in a process that promises to save you $8000 per year, pre-tax. The process has an expected life of 5 years with an initial cost of $10000. This cost is depreciated straight line over 5 years to a salvage value of $0, although the equipment is actually sold for $4000 after 5 years. Assume a 30% tax bracket and a discount rate of 10%. On the time-line diagram below show the relevant cash flows necessary for the NPV calculation. Be sure to show your work for each cash item you deem relevant
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