Kinky Copies may buy a high-volume copier. The machine costs $160,000 and will be depreciated straight-line over 5 years to a salvage value of $28,000. Kinky anticipates that the machine actually can be sold in 5 years for $38,000. The machine will save $28,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $14,000. The firm’s marginal tax rate is 35%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.)
Calculate the NPV. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $
Should Kinky buy the machine?
Yes No