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The Sausage Hut Is Looking at a New Sausage System

question 24

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The Sausage Hut is looking at a new sausage system with an installed cost of $438,000.This cost will be depreciated straight-line to zero over the project's four-year life,at the end of which the sausage system can be scrapped for $69,000.The sausage system will save the firm $129,000 per year in pretax operating costs,and the system requires an initial investment in net working capital of $29,000,which will be recouped at project end.If the tax rate is 35 percent and the discount rate is 9 percent,what is the NPV of this project?


Definitions:

Chapter 7

A section of the United States Bankruptcy Code that involves the liquidation of a debtor's assets to pay off creditors.

Debtor

A person or entity that owes a debt to another, typically financial in nature.

Hazardous Waste Site

A location where harmful chemicals and materials are stored or disposed of, posing potential risks to the environment and public health.

Potentially Responsible Party

An individual or entity that may be liable for the cleanup of a contaminated site under environmental laws.

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