Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Majestic Theaters is considering investing in some new projection equipment whose data are shown below. The required equipment has a 7-year project life falling into a CCA class of 30%, but
it would have a positive pre-tax salvage value at the end of Year 7. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and
cash operating costs are expected to be constant over the project's 7-year life. What is the project's NPV?
WACC
12.0%
Net capital investment in fixed assets $950,000
Required new working capital
Sales revenues, each year
Cash operating costs, each year
$30,000
$580,000
$330,000
Expected salvage value (fixed assets) $50,000
Tax rate
a. $13,965
b. $15,226
c. $16,920✓
d. $17,882
35.0%
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Transcribed Image Text:Majestic Theaters is considering investing in some new projection equipment whose data are shown below. The required equipment has a 7-year project life falling into a CCA class of 30%, but it would have a positive pre-tax salvage value at the end of Year 7. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and cash operating costs are expected to be constant over the project's 7-year life. What is the project's NPV? WACC 12.0% Net capital investment in fixed assets $950,000 Required new working capital Sales revenues, each year Cash operating costs, each year $30,000 $580,000 $330,000 Expected salvage value (fixed assets) $50,000 Tax rate a. $13,965 b. $15,226 c. $16,920✓ d. $17,882 35.0%
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