The firm is considering a new, 7-year project that costs $100,000 today. $30,000 will be expensed today, and the rest will be depreciated straight line over the life of the project The project is projected to produce operating revenues of $28,000 per year and costs of $4,000 per year, both starting at t = 1 and both in real dollars. The project requires an increase in working capital today of $12,000. The nominal cost of capital is 12% per year and the projected rate of inflation is 3% per year. The tax rate is 25%. What does the NPV method recommend?

Answer rating: 100% (QA)

ANSWER IS To determine the Net Present Value NPV of the project we need to calculate the present value of the projects cash flows and subtract the ini... View the full answer