Foley Systems is considering a new project whose data are shown
below. Under the new tax law, the equipment for the project is
eligible for 100% bonus depreciation, so it will be fully
depreciated at t = 0. After the project's 3-year life, the
equipment would have zero salvage value. The project would require
additional net operating working capital (NOWC) that would be
recovered at the end of the project's life. Revenues and operating
costs are expected to be constant over the project's life. What is
the project's NPV? (Hint: Cash flows from operations are constant
in Years 1 to 3.) Do not round the intermediate calculations and
round the final answer to the nearest whole number.
WACC |
10.0% |
Equipment cost |
$75,000 |
Required net operating working capital (NOWC) |
$15,000 |
Annual sales revenues |
$73,000 |
Annual operating costs |
$25,000 |
Tax rate |
25.0% |