The machinery required for a three year project costs $20,000, belongs in a 15% CCA class, and will require a net working capital investment of $5,000 up-front (net working capital is recovered at the end of the project). The project generates pre-tax sales less cash costs of $15,500 in each of years 1 to 3. The fixed assets will be sold for a salvage value of $2,000 at the end of the project. If the firm has a tax rate of 35% and a required return of 10%, what is the project NPV?
The machinery required for a three year project costs $20,000, belongs in a 15% CCA class, and will require a net working capital investment of $5,000 up-front (net working capital is recovered at the end of the project). The project generates pre-tax sales less cash costs of $15,500 in each of years 1 to 3. The fixed assets will be sold for a salvage value of $2,000 at the end of the project. If the firm has a tax rate of 35% and a required return of 10%, what is the project NPV?
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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