Question: XYZ is considering a project that would last for 3 years and have a cost of capital of 19.10 percent. The relevant level of net
XYZ is considering a project that would last for 3 years and have a cost of capital of 19.10 percent. The relevant level of net working capital for the project is expected to be $2,179.50 immediately (at year 0); $4,610.00 in 1 year; $15,200.00 in 2 years; and $0.00 in 3 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the following table. The tax rate is 49.00 percent. What is the net present value of this project? .
| Year 0 | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|
| Revenue | $ 0.00 | $13,500.00 | $13,700.00 | $10,700.00 |
| Costs | $ 0.00 | $3,960.00 | $3,580.00 | $2,700.00 |
| Depreciation | $ 0.00 | $2,450.00 | $2,250.00 | $2,700.00 |
| Cash flows from capital spending | $-7,550.00 | $1,170.00 | $ 640.00 | $3,700.00 |
| $6091.98 (plus or minus $10) | ||
| $10018.32 (plus or minus $10) | ||
| $850.49 (plus or minus $10) | ||
| $11469.45 (plus or minus $10) | ||
| None of the above is within $10 of the correct answe |
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