Consider a $12,000 Machine That Will Reduce After-Tax Operating Costs

question 24

Multiple Choice

Consider a $12,000 machine that will reduce after-tax operating costs by $2,500 per year over a five-year period. Assume no changes in net working capital and a salvage value of zero. Further assume that the machine belongs in a 20% CCA class, a marginal tax rate of 34%, and a required return of 10%. The project NPV is:

• A) $73
• B) $449
• C) $689
• D) $827
• E) $1,235

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