What is the npv ofthe purchase

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Problem - A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10}. The monitor would actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. The new monitor requires us to increase net working capital by $47,200 when we buy it. Assume a tax rate of 40%.

a. If we require a 15% return, what is the NPV ofthe purchase?

b. Suppose the monitor was assigned a 25% CCA rate. Calculate the new NPV.

Reference no: EM133028055

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