Q39
Single choice
ABC Inc. is considering the purchase of a new machine that will cost $150,000. The machine has an estimated useful life of three years. Assume for simplicity that the equipment will be fully depreciated 30, 40, and 30 percent in each of the three years, respectively. The new machine will have a $10,000 resale value at the end of its estimated useful life. The machine is expected to save the company $85,000 per year in operating expenses. ABC uses a 40 percent estimated income tax rate and a 16 percent hurdle rate to evaluate capital projects.
Discount rates for a 16 percent rate are as follows.
What is the net present value of this project?