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 |
$70,000 |
Annual operating costs (excl. depreciation) |
$30,000 |
Expected pre-tax salvage value |
$5,000 |
Tax rate |
35.0% |
Get Answers For Free
Most questions answered within 1 hours.