A company is considering a 6-year project that requires an initial outlay of $19,000. The project engineer has estimated that the operating cash flows will be $3,000 in year 1, $6,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, and $9,000 in year 6. At the end of the project, the equipment will be fully depreciated, classified as 5-year property under MACRS. The project engineer believes the equipment can be sold for $5,000 at the end of the project. If the tax rate is 37% and the required rate of return is 14%, what is the net present value (NPV) of this project?

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Computation of Depreciation under MACRS for 5 years life on 100 convention basis Firstyear Depreciat... View the full answer