Compute the net present value for this investment

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Jessica is evaluating an idea to open her own business. The initial investment is estimated to be $100,000. The investment horizon is 5 years. She will use a 5-year straight-line depreciation schedule, with an ending book value of zero for the assets. The salvage value for the assets at the end of the project is $20,000. The initial working capital requirement is $10,000 and the working capital remains to be $10,000 each year. Jessica expects to generate the revenues of $80,000 with the costs of $40,000 each year during the 5-year time period. The tax rate is 20%. Compute the net present value (NPV) for this investment using the required return of 15%.

Reference no: EM132028816

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