Question: 2. Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3 year MACRS tax life. It would have
| 2. Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3 year | ||||||||||
| MACRS tax life. It would have a pre tax salvage value at the end of year 3, when the project would be closed down | ||||||||||
| as shown below. Revenues and other operating costs are expected to be constant over the project's 3 year life. | ||||||||||
| What is the project's NPV? | ||||||||||
| WACC | 10.00% | |||||||||
| Net investment in fixxed assets (depreciable basis) | $70,000 | |||||||||
| Required new working capital | $10,000 | |||||||||
| MACRS deprec. Rate | .33 .45 .15 .07 | |||||||||
| Increased sales revenues each year | $75,000 | |||||||||
| Increased operating costs (excl. deprec.) each year | $30,000 | |||||||||
| Expected salvage value | $5,000 | |||||||||
| Tax rate | 35.00% | |||||||||
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