Compute the NPV of the project

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Reference no: EM132861784

Question - Consider the following data:

A machine costs $300 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the new US corporate tax code of 2018.

This company has current pre-tax profits from other projects that are greater than $300, so it can take full advantage of the investment tax break above in year 0.

The machine will generate operating profits before depreciation (EBITDA) of $130 per year for 4 years. The first cash flow happens one year after the machine is put in place (year 1).

Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes. - The tax rate is 21%

There is no salvage value at the end of the four years (the machine is worthless), and no required working capital investment.

Required - Compute the NPV of the project if the discount rate is 9%. Please show your work below, not just the final answer.

Reference no: EM132861784

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