Thomson Media is considering some new equipment whose data are shown below. The equipment has a...
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Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3- year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital (NOWC) would be required, but it would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $124,000 Required net operating working capital (NOWC) $14,000 Annual sales revenues $85,000 Annual operating costs $25,000 Expected pre-tax salvage value $5,000 Tax rate 25.0% Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3- year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital (NOWC) would be required, but it would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $124,000 Required net operating working capital (NOWC) $14,000 Annual sales revenues $85,000 Annual operating costs $25,000 Expected pre-tax salvage value $5,000 Tax rate 25.0%
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To calculate the projects NPV we need to determine the operating cash flows for each year and the te... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
Posted Date:
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