makabhai    this problem, given the same data has several different answers for the NPV. Please show in excel with formulas that correct answer.   TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV? WACC 10.0% Pre-tax cash flow reduction for other products (cannibalization) -$5,000 Investment cost (depreciable basis) $80,000 Straight-line deprec. rate 33.333% Sales revenues, each year for 3 years $67,500 Annual operating costs (excl. deprec.) -$25,000 Tax rate 35.0%

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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makabhai 

 

this problem, given the same data has several different answers for the NPV. Please show in excel with formulas that correct answer.

 

TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV?

WACC 10.0%

Pre-tax cash flow reduction for other products (cannibalization) -$5,000

Investment cost (depreciable basis) $80,000

Straight-line deprec. rate 33.333%

Sales revenues, each year for 3 years $67,500

Annual operating costs (excl. deprec.) -$25,000

Tax rate 35.0%

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