Question

Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (depreciable basis) $70,000 Required net operating working capital $10,000 Straight-line depreciation rate 33.333% Annual sales revenues $56,000 Annual operating costs (excl. depreciation) $30,000 Expected pre-tax salvage value $5,000 Tax rate 35.0%

Answer #1

Thomson Media is considering some new equipment whose data are
shown below. The equipment has a 3-year tax life and would be fully
depreciated by the straight-line method over 3 years, but it would
have a positive pre-tax salvage value at the end of Year 3, when
the project would be closed down. Also, additional net operating
working capital would be required, but it would be recovered at the
end of the project's life. Revenues and other operating costs are...

Thomson Media is considering some new equipment whose data are
shown below. The equipment has a 3-year tax life and would be fully
depreciated by the straight-line method over 3 years, but it would
have a positive pre-tax salvage value at the end of Year 3, when
the project would be closed down. Also, additional net operating
working capital would be required, but it would be recovered at the
end of the project's life. Revenues and other operating costs are...

Thomson Media is considering some new equipment whose data are
shown below. The equipment has a 3-year tax life and would be fully
depreciated by the straight-line method over 3 years, but it would
have a positive pre-tax salvage value at the end of Year 3, when
the project would be closed down. Also, additional net operating
working capital would be required, but it would be recovered at the
end of the project's life. Revenues and other operating costs are...

Thomson Media is
considering some new equipment whose data are shown below. The
equipment would be used for three years with straight-line
depreciation, but it would have a positive pre-tax salvage value at
the end of Year 3, when the project would be closed down. Also,
additional net operating working capital would be required, but it
would be recovered at the end of the project's life. Revenues and
other operating costs are expected to be constant over the
project's 3-year...

Moore Media is considering some new equipment whose data are
shown below. The equipment has a 3-year tax life and would be fully
depreciated (to zero net book value) by the straight-line method
over 3 years, but it would have a positive pre-tax salvage value at
the end of Year 3, when the project would be closed down. Also,
additional net operating working capital would be required, but it
would be recovered at the end of the project's life. Revenues...

TexMex Food Company is considering a new salsa whose data are
shown below. The equipment to be used would be depreciated by the
straight-line method over its 3-year life and would have a zero
salvage value, and no change in net operating working capital would
be required. Revenues and other operating costs are expected to be
constant over the project's 3-year life. However, this project
would compete with other TexMex products and would reduce their
pre-tax annual cash flows. What...

A firm is considering a new investment whose data are shown
below. The equipment would be depreciated on a straight-line basis
over the project's 3-year life, would have a zero salvage value,
and would require additional net operating working capital that
would be recovered at the end of the project's life. Revenues and
other operating costs are expected to be constant over the
project's life. What is the project's NPV ( no decimal
places) (Hint: Cash flows from operations are constant...

A firm is considering a new investment whose data are shown
below. The equipment would be depreciated on a straight-line basis
over the project's 3-year life, would have a zero salvage value,
and would require additional net operating working capital that
would be recovered at the end of the project's life. Revenues and
other operating costs are expected to be constant over the
project's life. What is the project's NPV ( no decimal places)
(Hint: Cash flows from operations are...

A firm is considering a new investment whose data are shown
below. The equipment would be depreciated on a straight-line basis
over the project's 3-year life, would have a zero salvage value,
and would require additional net operating working capital that
would be recovered at the end of the project's life. Revenues and
other operating costs are expected to be constant over the
project's life. What is the project's NPV ( no decimal
places) (Hint: Cash flows from operations are constant...

A firm is considering a new investment whose data are shown
below. The equipment would be depreciated on a straight-line basis
over the project's 3-year life, would have a zero salvage value,
and would require additional net operating working capital that
would be recovered at the end of the project's life. Revenues and
other operating costs are expected to be constant over the
project's life. What is the project's NPV ( no decimal
places) (Hint: Cash flows from operations are constant...

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