A three-year project has an initial equipment cost of $10,000. The equipment cost will be depreciated in
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A three-year project has an initial equipment cost of $10,000. The equipment cost will be depreciated in a straight line over the three years towards a $1,000 salvage value. Cash sales are expected to be $25,000 with 70% cost of goods sold. The corporate tax rate is 20% and the appropriate discount rate is 15%.
3.1 What is the project net present value? Should the project be accepted?
3.2 The project will require $8,000 working capital in year 0. What is the project net present value? Should the project be accepted?
Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
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