Question: The Ambergast Corporation is considering a project that has a three-year life and costs $ 1,200. It would save $360 per year in operating costs

The Ambergast is considering a project that has a three-year life and costs $ 1,200. It would save $360 per year in operating costs and increase revenue by $200 per year. It would be financed with a three-year loan with the following payment schedule (the annual rate of interest is 5%):

If the company has a 10% after-tax weighted average cost of capital, has a 40% tax rate, and uses straight-line depreciation, what is the net present value of the project?

Payment Interest Repayment of Principal Balance 440.65 60.00 44065 4097 440.65 2098 380.65 399.68 419.67 1,200.00 819.35 419.67 121.95

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