Moose Pastures Inc. (MPI) is debating whether to buy a new machine that
costs $340,000 and would increase after tax operating revenues by $90,000
annually. The new machine has an 8-year life and expected salvage value of
$81,000. There is also a required investment of
$45,000 in net working capital at project start and it will be recovered at the
end of the project. The firm’s tax rate is 34%, the CCA rate is 25%, and the
required rate of return is 7%. There are no capital gains/losses to worry about.
What would be the NPV of buying this machine?
A) $58,409
B) $204,402
C) $284,519
D) $374,159