Reference no: EM132499567

Question 1: Thomson Media is considering investing in some new equipment whose data are shown below. The equipment has a 3-year class life and will be depreciated by the MACRS depreciation system, and it will have a positive pre-tax salvage value at the end of Year 3, when the project will be closed down. Also, some new working capital will be required, but it will be recovered at the end of the project's life. Revenues and cash operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

WACC                                                                        14.0%

Net investment in fixed assets (depreciable basis)             $60,000

Required new working capital                                        $10,000

Sales revenues, each year                                           $75,000

Operating costs excl. depr'n, each year                       $30,000

Expected pretax salvage value                                      $7,000

Tax rate                                                                        35.0%