QUESTION 9: Chicago Food Services is considering installing a new refrigeration system that will cost $600,000. The system will be depreciated at a rate of 20% (Class 8) per year over the system's ten- year life and then it will be sold for $90,000. The new system will save $180,000 per year in pre-tax operating costs. An initial investment of $70,000 will have to be made in working capital. The tax rate is 35% and the discount rate is 10%. Calculate the NPV of the new refrigeration system. All calculations must be shown.
QUESTION 9: Chicago Food Services is considering installing a new refrigeration system that will cost $600,000. The system will be depreciated at a rate of 20% (Class 8) per year over the system's ten- year life and then it will be sold for $90,000. The new system will save $180,000 per year in pre-tax operating costs. An initial investment of $70,000 will have to be made in working capital. The tax rate is 35% and the discount rate is 10%. Calculate the NPV of the new refrigeration system. All calculations must be shown.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PA: The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000,...
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![QUESTION 9: Chicago Food Services is considering installing a new refrigeration system that will cost
$600,000. The system will be depreciated at a rate of 20% (Class 8) per year over the system's ten-
year life and then it will be sold for $90,000. The new system will save $180,000 per year in pre-tax
operating costs. An initial investment of $70,000 will have to be made in working capital. The tax rate
is 35% and the discount rate is 10%. Calculate the NPV of the new refrigeration system. All
calculations must be shown.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd58560c-94a2-42e6-b661-75f755baa813%2F76084b8e-c133-4c43-b0d8-bb38178e854e%2F4qmgvf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION 9: Chicago Food Services is considering installing a new refrigeration system that will cost
$600,000. The system will be depreciated at a rate of 20% (Class 8) per year over the system's ten-
year life and then it will be sold for $90,000. The new system will save $180,000 per year in pre-tax
operating costs. An initial investment of $70,000 will have to be made in working capital. The tax rate
is 35% and the discount rate is 10%. Calculate the NPV of the new refrigeration system. All
calculations must be shown.
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