Your company, Dominant Retailer, Inc., is considering a project whose data are shown below. Revenue and cash operating expenses are expected to be constant over the project's 5 year expected operating life; annual sales revenue is $99,000.00 and cash operating expenses are $49,750.00. The new equipment's cost and depreciable basis is $155,000.00 and it will be depreciated by MACRS as 5 year property. The new equipment replaces older equipment that is fully depreciated but can be sold for $7,000. In addition, the new equipment requires an additional $5,000 of net operating working capital, which can be fully recovered at the end of the project. The new equipment is expected to be sold for $10,750 at the end of the project in year 5. The marginal tax rate is 20.00%., what is the NPV of the Project if Dominant Retailer’s WACC is 16.75%? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box.
NPV: - 633.68
|Cost of asset||(155,000)|
|Investment in working capital||(5,000)|
|After tax salvage value of old asset||5,600|
|Annual EBITDA ( 99,000 - 49,750 )||49,250||49,250||49,250||49,250||49,250|
|Operating cash flows after taxes ( EBITDA x 0.80 + Depreciation x 0.20 )||45,600||49,320||45,352||42,971||42,971|
|Working capital recovered||5,000|
|After tax salvage value of new asset||10,386|
|PV factor at 16.75 %||1.0000||0.8565||0.7336||0.6284||0.5382||0.4610|
|Net Present Value||(633.68)|
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