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Kinky Copies may buy a high-volume copier

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Question

Kinky Copies may buy a high-volume copier. The machine costs $30,000 and will be depreciated straight-line over 5

years to a salvage value of $5,000. Kinky anticipates that the machine actually can be sold in 5 years for $12,000. The machine will save $5,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $2,500. The firm’s marginal tax rate is 35%, and the discount rate is 10%. (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?
 
YesNo
 
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