Question: Violet Sky Aviation is considering a project that would last for 2 years and have a cost of capital of 19.89 percent. The relevant level
Violet Sky Aviation is considering a project that would last for 2 years and have a cost of capital of 19.89 percent. The relevant level of net working capital for the project is expected to be 21,000 dollars immediately (at year 0): 12,000 dollars in 1 year, and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project? Year 0 Year 1 Year 2 Revenue SO 162,000 162,000 Costs 50 56,000 56,000 Depreciation SO 36,000 36,000 Cash flows from capital spending -70,000 0 23,000 Number
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