What is the npv for the tool investment

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The Miracle company is evaluating the purchase of a tool that falls under the 3-year asset life category for MACRS and is expected to a 4 year life. The tool will cost $700,000. If the tool is purchased, inventories and accounts payable will have to increase upon purchase by $50,000 and $10,000, respectively. With the additional flexibility from the manufacturing tool, sales are expected to increase by $600,000 the first year and not grow further while maintenance expenses will increase $300,000. Any net operating working capital will be recovered at the end of the project as well as the manufacturing tool can be sold for $50,000. Miracle co. has a 10% WACC and a 40% tax rate. What is the NPV for the tool investment?

Reference no: EM13298266

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