The Bondi Pizza Palace is looking at a new pizza oven 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 system can be scrapped for $69 000.The pizza system will save the firm $129 000 per year in pre-tax 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 per cent and the discount rate is 9 per cent,what is the NPV of this project?

Question

Quizplus · Accepted Answer

The Answer of The Bondi Pizza Palace is looking at a new pizza oven 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 system can be scrapped for $69 000.The pizza system will save the firm $129 000 per year in pre-tax 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 per cent and the discount rate is 9 per cent,what is the NPV of this project?

The Bondi Pizza Palace Is Looking at a New Pizza