ACG 3024-Tatyana’s Tattoos, LLC, is considering the purchase
Tatyana’s Tattoos, LLC, is considering the purchase of a new electric needle that can apply different colored inks without switching ink tanks. The cost is $12,200 and Tatyana believes it will produce additional revenues of about $10,000 per year. Cash operating costs for the needle, not including depreciation, will be $5,500 per year and she believes the machine will last for five years after which it will have no salvage value.The corporate tax rate is 25%; Tatyana’s financial backers require a 15% rate of return and a present value analysis will use straight-line depreciation.What is the net present value of the needle?
