Thomson Media 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, additional net operating 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? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC10.0% Net investment in fixed assets (depreciable basis)$70,000 Required net operating working capital$10,000 Straight-line depreciation rate33.333%
Annual sales revenues$70,000 Annual operating costs (excl. depreciation)$30,000 Expected pre-tax salvage value$5,000 Tax rate35.0% ?
A. 0$14,922
B. 0$17,011
C. 0$12,982
D. 0$15,668
E. 0$14,773
Answer: A
You might also like to view...
Which of the following is NOT a bad listening habit?
a. Faking attention b. Thinking ahead c. Overlistening d. All are bad listening habits
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by
a. borrowing funds. b. bringing in partners. c. issuing stock. d. selling the business.
If shipped goods are damaged or destroyed after risk of loss passes:
A) the contract is avoided B) the seller has breached the contract C) the buyer has the option to accept or not accept the goods D) it is the buyer's loss
Tax plans are closely tied to investment plans.
Answer the following statement true (T) or false (F)