Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new office. The equipment for the project would be depreciated by the straight-line method over the project's 3-year life, after which it would be worth nothing and thus it would have a zero salvage value. No change in net operating working capital would be required, and revenues and other operating costs would be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC10.0% Opportunity cost$100,000 Net
equipment cost (depreciable basis)$65,000 Straight-line depr. rate for equipment33.333% Annual sales revenues$128,000 Annual operating costs (excl. depr.)$25,000 Tax rate35% ?
A. 020,353
B. 022,592
C. 021,168
D. 021,575
E. 017,707
Answer: A
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