Question: A five - year project will cost $ 4 , 0 0 0 , 0 0 0 to construct. This will be depreciated straight line
A fiveyear project will cost $ to construct. This will be depreciated straight line to zero over the fiveyear life. The project is expected to generate annual sales of $It has annual variables costs of $ and annual fixed costs of $ The appropriate tax rate is percent and the required rate of return on the project is percent. Assume that a salvage company will pay $before taxes for the assets at the end of year The project also has an initial net working capital requirement of $ which is fully recoverable when the project ends in year Note that the project only depreciates the $ initial cost. The salvage value is excluded from depreciation. What is the projects net present value NPV Should the firm accept the project?
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