Twoquest Inc is considering a new investment. The following table sets out information regarding the firm and the potential project:

1. Annual revenues for the project $1,200,000 
2. Annual expenses for the project $740,000 
3. Initial investment $1,000,000 
4. The weighted average cost of capital is 12 
5. Corporate tax rate 40
6. Market value debt-equity ratio 1 
7. Cost of debt 12 

The project has an expected life of five years There will be no salvage value at that time Annual revenues and expenses occur at the end of each year for the five years Assume that the initial investment can be neither amortized nor expensed for tax purposes What is the net present value of the project?

a) $994,980

b) $658,300 

c) $380,000 

d) $131,600 

e) $(5,020)

Answer rating: 100% (QA)

NPV PV of aftertax cash flows for five years at ... View the full answer