You are asked to evaluate a project proposal for Edmonton Plaza. The equipment that would be used would have a constant annual capital cost allowance over the projects 3-year life and a zero salvage value. This project would require some additional working capital that would be recovered at the end of the projects life. Revenues and cash operating costs are expected to be constant over the projects 3-year life. What is the projects NPV?

WACC 10.0% Net investment in fixed assets (basis)

$65,000 Required new working capital $10,000

Annual capital cost allowance $21,665

Sales revenues, each year $70,000

Cash operating costs, each year $25,000

Tax rate 35.0%

a. $24,112 b. $26,584 c. $27,913 d. $25,318