New Tech (NT) is looking to expand its business. The new business would generate $600,000 per...

 

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New Tech (NT) is looking to expand its business. The new business would generate $600,000 per year in sales over the next 5 years. Annual costs would increase by $200,000. An investment in working capital of $10,000 would have to be made initially (and be recovered at the end of the project). The equipment (CCA rate of 30%, half-year rule applies) would cost $500,000. NT estimates that it would be possible to sell the equipment for 20% of its initial value at the end of 5 years. If NT's cost of capital is 10% and its tax rate is 25%, what is the NPV of this project? (answer positive number with no decimal and no comma nor dollar sign) This question is worth 20% of your grade. Answer: New Tech (NT) is looking to expand its business. The new business would generate $600,000 per year in sales over the next 5 years. Annual costs would increase by $200,000. An investment in working capital of $10,000 would have to be made initially (and be recovered at the end of the project). The equipment (CCA rate of 30%, half-year rule applies) would cost $500,000. NT estimates that it would be possible to sell the equipment for 20% of its initial value at the end of 5 years. If NT's cost of capital is 10% and its tax rate is 25%, what is the NPV of this project? (answer positive number with no decimal and no comma nor dollar sign) This question is worth 20% of your grade. Answer:

Answer rating: 100% (QA)

Solution To calculate the NPV of the project we need to calculate the annual cash inflows and outflo... View the full answer