Calculate the NPV for a RIG project that is expected to generate revenues of $1,400,000 per year
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Question:
Calculate the NPV for a RIG project that is expected to generate revenues of $1,400,000 per year before tax, in each of the next 10 years. The PV (CCA tax shield) method for depreciation is appropriate using the half-year rule. The applicable CCA rate is 30%, salvage value will be zero, and net working capital considerations are minimal. Initial cost is 8.5 million. The firm tax rate is 30%.
1. Determine the NPV of the project using 9.90 as the discount rate.
2. Rework the analysis in part 1 using a discount rate of 10%. What is the revised NPV of the project?
Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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