DeVault Services recently hired you as a consultant to help with its capital budgeting process. The...

Transcribed Image Text:

DeVault Services 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. The risk-adjusted cost of capital is 0.089. What is the project's NPV? Risk-adjusted cost of capital 0.089 Net investment cost (depreciable basis) $100,447 Straight-line deprec. rate 33.3333% Sales revenues, each year $95,500 Operating costs (excl. deprec.), each year $43,000 Tax rate 27.0% DeVault Services 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. The risk-adjusted cost of capital is 0.089. What is the project's NPV? Risk-adjusted cost of capital 0.089 Net investment cost (depreciable basis) $100,447 Straight-line deprec. rate 33.3333% Sales revenues, each year $95,500 Operating costs (excl. deprec.), each year $43,000 Tax rate 27.0%