Question: What is the net present value for this project? PERIOD 0 1 2 3 4 EBIT $ 4 , 0 0 0 $ 5 ,

What is the net present value for this project?


PERIOD 01234
EBIT $4,000 $5,500 $7,000 $9,000
The above table illustrates earnings before interest and taxes for a capital investment project. Additional information for this project:

initial cost of the investment = $30,000
change in net working capital = $5,000(and all of this is recoverable at end of the project)
erosion costs are $1,500, $1,000, and $500 for Years 1,2, and 3 respectively
tax rate =29.0%
WACC =12.5%
depreciation = straight line over six years
salvage value is not an issue


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