Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows from operations are constant in Years 1 to 3.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (basis) $75,000 Required net operating working capital $15,000 Straight-line depreciation rate 33.333% Annual sales revenues $50,000 Annual operating costs (excl. depr.) $25,000 Tax rate 35.0% a. $-19,043 b. $-18,380 c. $-â16,559 d. $-17,221 e. $-20,368
Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows from operations are constant in Years 1 to 3.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (basis) $75,000 Required net operating working capital $15,000 Straight-line depreciation rate 33.333% Annual sales revenues $50,000 Annual operating costs (excl. depr.) $25,000 Tax rate 35.0% a. $-19,043 b. $-18,380 c. $-â16,559 d. $-17,221 e. $-20,368
Related questions
A company recently hired you as a consultant to help with its capital budgeting process. The company is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV, IRR and Payback period?
| Risk-adjusted WACC | 10.0% |
| Net investment cost (depreciable basis) | $65,000 |
| Straight-line deprec. rate | 33.3333% |
| Sales revenues, each year | $65,500 |
| Operating costs (excl. deprec.), each year | $25,000 |
| Tax rate | 35.0% |
