Question

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 in Years 1 to 3.) WACC 9% Net investment in fixed assets (depreciable basis) $75,000 Required net operating working capital at t=0 $15,000 Straight-line depreciation rate 33.333% Annual sales revenues $75,000 Annual operating costs (excl. depreciation) $25,000 Tax rate 21.0%

Answer 1