Change in net operating working capital

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TexMex Food Company is considering anew salsa whose data are shown below. the equipment to be used would be depreciated by the straight-line method over its 3 year life and would have a zero salvage value, and no change in net operating working capital would be required. revenues and other operating costs are expected to be constant over the projects 3 year life. However, this project would compete with other TexMex products and would reduce their pre-tax, annual cash flows. What is the project's NPV?

WACC 10.0%

Pre tax cash flow reduction for other products -$5,000

Investment Cost depreciable basis $80,000

Annual sales revenues $67,500

Straight line depreciation 33.333%

Annual operating cost -$25,000

Tax rate 35.0%

Reference no: EM131910108

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