Firm is contemplating the purchase of a new warehouse inventory management system which will cost 3,600,000 at the end of its 8 year life. The warehouse management system will be depreciated straight line to 300,000 over its 8 year life. It is estimated it will reduce costs by 700,000 per year. Also it's initial implementation will result in a permanent reduction of working capital of 400,000. The tax rate is 40%
What is the initial investment (Investment in year 0)?
A. 2,100,000
B. 2,400,000
C. 3,200,000
D. 3,600,000
E. 4,000,000
0 answers