Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?
Project cost of capital (r)10.0%
Net investment in fixed assets (depreciable basis)$70,000
Required new working capital$10,000
Straight-line deprec. rate33.333%
Sales revenues, each year$75,000
Operating costs (excl. deprec.), each year$30,000
Expected pretax salvage value$5,000
Tax rate25.0%
A. $25,964
B. $27,330
C. $28,768
D. $30,207
E. $31,717
Answer: C
You might also like to view...
Considering the fact that the "message" is at the heart of advertising, discuss how creative strategy and different types of appeals can be created in global advertising
What will be an ideal response?
Dividends in arrears are required to be reported in:
A) a liability account. B) a contra-equity account. C) the stockholders' equity section of the balance sheet. D) the notes to the financial statements.
Which of the following completes the statement, ‘A ______ is a snapshot of your ideal customer that tells a story using the information you used for segmentation (i.e., demographic, geographic, psychographic, benefits sought, and behaviour).’?
a. CRM. b. Biographical outline. c. Personality sketch. d. Predictive model. e. Buyer persona.
When transforming a weak entity, one should create one relation with both the attributes of the strong entity and the attributes of the weak entity
Indicate whether the statement is true or false