A Digital Assembly System That Costs $160,000 Is Expected to Operate

Multiple Choice

A digital assembly system that costs $160,000 is expected to operate for 8 years. The estimated salvage value at the end of 8 years is $12,000. The system is expected to save the company $38,000 in labor costs before taxes and depreciation. The company will depreciate this system on a 5-year MACRS schedule. If the firm's cost of capital is 12% and its marginal tax rate is 35%, compute the NPV for the project. (Note: Requires MACRS tables.)

A) $4,045
B) $7,196
C) $20,873
D) $167,196