Calculate the NPV of the project

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Question - A project requires an initial capital outlay of $90,000 and an initial investment in working capital of $10,000 (at t= 0). You expect the project to produce sales revenue of $120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end [i.e., t=1, t=2, and t=3]). The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $10,000 and also recover the investment in net working capital. The corporate tax rate is 21% and the cost of capital is 12%. Calculate the NPV of the project

A. $12,873

B. $18,950

C. $42,660

D. $8,443

E. ($2,735)

Reference no: EM132817700

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