Looner Industries is currently analyzing the purchase of a research equipment that costs $160,000 and requires $20,000 in installation costs. The firm will depreciate the equipment under MACRS using a 3-year asset class and expects to sell the equipment $10,000 at the end of its 3-year economic life. The equipment should reduce pre-tax operating costs (excluding depreciation) by $30,000 a year and has a required rate of return estimated at 14 percent. Looner is subject to a 40 percent marginal tax rate. What is the NPV of this project?
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