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Dog Up! Franks is looking at a new sausage system with an installed cost of $450,000. This cost will be depreciated straight-
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Answer #1

rate positively .. let me know if you need any clarification..

computation of NPV
year 0 1 2 3 4 5
Initial investment -450000
Working capital -25500 25500
Operating cash flow
Saving 140000 140000 140000 140000 140000
Depreciation 90000 90000 90000 90000 90000
Saving after depreciation 50000 50000 50000 50000 50000
Tax @ 24% 12000 12000 12000 12000 12000
Saving after tax 38000 38000 38000 38000 38000
Cash flow 128000 128000 128000 128000 128000
Terminal cash flow 41800
55000*(1-24%)
net cash flow -475500 128000 128000 128000 128000 195300
PVIF @ 12% 1 0.892857 0.797194 0.71178 0.635518 0.567427
present value -475500 114285.7 102040.8 91107.87 81346.31 110818.5 24099.18
Therefore answer = 24099.18
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