You are evaluating a capital project with a Net Investment of $400,000, which includes an increase in net working capital of $16,000. The project has a life of 12 years with an expected salvage value of $3,000. The project will be depreciated via simplified straight-line depreciation. Revenues are expected to increase by $90,000 per year and operating expenses by $8,000 per year. The firm's marginal tax rate is 40 percent and the cost of capital for this project is 15%. What is the net present value of this project? Round to the nearest penny. Do not include a dollar sign.
|Annual Operating Cf:|
|Less: Depreciation (400000-3000)/12||33083|
|Before tax Income||48917|
|Less: Tax @ 40%||19566.8|
|After tax income||29350.2|
|Multiply: Annuity PVF at 15% for 12yrs||5.84737|
|Present value of Inflows||365070|
|Present value of salvage (3000*0.122894)||368.682|
|Present value of WC release (16000*0.122894)||1966.304|
|Less: Initial investment||-400000|
|Less: Investment in WC||-16000|
|Net present value||-48595|
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