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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The Third Street Eatery is considering a 4 year expansion project that will require an initial
fixed asset investment of $2.24 million. The fixed asset will be depreciated straight-line to
zero over its 4 year tax life, after which time it will have a market value of $434,000. The
project requires an initial investment in net working capital of $266,000, which will be fully
recovered when the project is terminated. Estimated sales are $2,380,000 per year, with costs
of $1,013,000. The tax rate is 32.0% and the required return for the project is 16.80%. Find
the project's NPV. Ignore any bonus depreciation.
$479,555.79
O $706,185.86
O $849,111.54
O $690,539.26
O $886,915.54
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Transcribed Image Text:The Third Street Eatery is considering a 4 year expansion project that will require an initial fixed asset investment of $2.24 million. The fixed asset will be depreciated straight-line to zero over its 4 year tax life, after which time it will have a market value of $434,000. The project requires an initial investment in net working capital of $266,000, which will be fully recovered when the project is terminated. Estimated sales are $2,380,000 per year, with costs of $1,013,000. The tax rate is 32.0% and the required return for the project is 16.80%. Find the project's NPV. Ignore any bonus depreciation. $479,555.79 O $706,185.86 O $849,111.54 O $690,539.26 O $886,915.54
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