Your Company Is Considering a Machine Which Will Cost $50,000

Multiple Choice

Your company is considering a machine which will cost $50,000 at Time 0 and which can be sold after 3 years for $10,000.$12,000 must be invested at Time 0 in inventories and receivables;these funds will be recovered when the operation is closed at the end of Year 3.The facility will produce sales revenues of $50,000/year for 3 years;variable operating costs (excluding depreciation) will be 40 percent of sales.No fixed costs will be incurred.Operating cash inflows will begin 1 year from today (at t = 1) .By an act of Congress,the machine will have depreciation expenses of $40,000,$5,000,and $5,000 in Years 1,2,and 3,respectively.The company has a 40 percent tax rate,enough taxable income from other assets to enable it to get a tax refund on this project if the project's income is negative,and a 15 percent required rate of return.Inflation is zero.What is the project's NPV?

A) $7,673.71
B) $12,851.75
C) $17,436.84
D) $24,989.67
E) $32,784.25