Compute the cost of npv of this cost cutting project

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Reference no: EM131944471

Capital Budegting) Your task is to analyze a cost cutting project, where a new and more efficient machinery is installed. You have the following data:

• Acquisition cost of new machinery: 200000

• Additional working capital investment: 20,000 (recovered at the end of project)

• Annual (Before tax) cash savings from the improved efficiency: 50,000

• Lifespan of new machinery: 5 years

• Corporate marginal tax rate : 35%

• Depreciation : straight line to zero book value

• Market value of machinery in 5 yrs:40,000

• Cost of capital 12% Compute the cost of NPV of this cost cutting project and argue if company should invest in this project?

Reference no: EM131944471

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