Question: Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated using the MCRS system basis over the projects

Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated using the MCRS system basis over the projects 4-year life, would have a $2,000 salvage value, and would require some additional working capital that would be recovered at the end of the projects life. Revenues and other operating costs are expected to be constant over the projects life. What is the projects NPV?

The accelerated rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4.

WACC 10.0%

Net initial investment in fixed assets $75,000

Required new working capital $15,000

Sales revenues, each year $75,000

Operating costs (excluding depreciation), each year $25,000

Tax rate 40.0%

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