Question: XYZ is considering a project that would last for 3 years and have a cost of capital of 19.90 percent. The relevant level of net
XYZ is considering a project that would last for 3 years and have a cost of capital of 19.90 percent. The relevant level of net working capital for the project is expected to be $1,938.70 immediately (at year 0); $4,800.00 in 1 year, $13,800.00 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 53.40 percent. What is the net present value of this project? Year o Year 1 Year 2 Year 3 Revenue $ 0.00 $11,700.00 $10,700.00 $10,400.00 Costs $0.00 $3,770.00 $3,770.00 $3,900.00 Depreciation $ 0.00 $2,170.00 $1,810.00 $2,900.00 Cash flows from capital spending $-6,600.00 $ 250,00 $ 870.00 $4,030,00 $3595.18 (plus or minus 510) $7043.49 (plus or minus $10) OS-1156.14 (plus or minus $10) $8754.03 (plus or minus $10) None of the above is within $10 of the correct
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