Compute the after tax npw of this endeavor for the company

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Reference no: EM131911243

Problem

A manufacturing company spends $400,000 for the purchase and installation of a fully automated production facility for a subsystem of its main product. This operation is going to save the company a net $100,000 each year. The company is using the straight-line depreciation method and assumes a life of six years and a resale value of $10,000 for depreciation purposes. The company abandons this operation after five years and sells the facility for $100,000. The company has a combined tax rate of 40% and his cost of money is 8%. Calculate the after tax NPW of this endeavor for the company.

Reference no: EM131911243

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