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%, butit 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 andcash operating costs are expected to be constant over the project's 7-year life. What is the project's NPV?WACC12.0%Net capital investment in fixed assets $950,000Required new working capitalSales revenues, each yearCash operating costs, each year$30,000$580,000$330,000Expected salvage value (fixed assets) $50,000Tax ratea. $13,965b. $15,226c. $16,920✓d. $17,88235.0%

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Answered: Majestic Theaters is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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