What is the net present worth of automation system

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"The Norcross Fiber Company is considering automating its piece-goods screen-printing system at a cost of $40,000. The firm expects to phase out the new printing system at the end of 5 years due to changes in style. At that time, the firm could scrap the system for $8,000 in today's dollars. The expected net savings (revenue - expenses) due to automation also are in today's (constant) dollars: Year 1 $29,000; Year 2 $14,000; Years 3-5 $12,000. The system qualifies as a 5-year MACRS property and will be depreciated accordingly. The general inflation rate over the next 5 years is 4% per year. Asume the net savings and the scrap value are subject to this inflation rate. The firm's inflation-free MARR is 14%. The firm's tax rate is 38%. What is the net present worth of this automation system? "

Reference no: EM132044496

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