The Market Place is considering a new four-year expansion project that requires an initial fixed asset investment
Question:
The Market Place is considering a new four-year expansion project that requires an initial fixed asset investment of $1.67 million. The fixed asset will be depreciated straight-line to zero over its four-year tax life, after which time it will have a market value of $435,000. No bonus depreciation will be taken. The project requires an initial investment in net working capital of $198,000, all of which will be recovered at the end of the project. The project is estimated to generate $1,850,000 in annual sales, with costs of $1,038,000. The tax rate is 21 percent and the required return for the project is 16.4 percent. What is the net present value?
A) $241,334.55
B) $451,180.73
C) $254,595.45
D) $302,208.15
E) $358,576.22
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan