Genoa Company 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? WACC 14.57% Net investment in fixed assets (basis) $75,000 Required net operating working capital $33,000 Straight-line depreciation rate 33.333% Annual sales revenues $81,000 Annual operating costs (excl. depr.) $35,000 Tax rate 35.0% $3,018 $2,974 $3,009 $2,712 $2,823.05
Genoa Company 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? WACC 14.57% Net investment in fixed assets (basis) $75,000 Required net operating working capital $33,000 Straight-line depreciation rate 33.333% Annual sales revenues $81,000 Annual operating costs (excl. depr.) $35,000 Tax rate 35.0% $3,018 $2,974 $3,009 $2,712 $2,823.05
Genoa Company 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? WACC 14.57% Net investment in fixed assets (basis) $75,000 Required net operating working capital $33,000 Straight-line depreciation rate 33.333% Annual sales revenues $81,000 Annual operating costs (excl. depr.) $35,000 Tax rate 35.0% $3,018 $2,974 $3,009 $2,712 $2,823.05
Genoa Company 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?
WACC
14.57%
Net investment in fixed assets (basis)
$75,000
Required net operating working capital
$33,000
Straight-line depreciation rate
33.333%
Annual sales revenues
$81,000
Annual operating costs (excl. depr.)
$35,000
Tax rate
35.0%
$3,018
$2,974
$3,009
$2,712
$2,823.05
Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video
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