Computing project-s npv, What is the project's NPV? If you

Computing project-s npv

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Reference no: EM1339898

Q1) Herrolds resorts is considering a new project whose data are shown below. The equipment that would be used has a 3 year tax life would be deprecated by the straight line method over the project's 3 year life and would have zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3 year life. What is the project's NPV? If you are working this problem by hand rather than by computer, ignore small rounding differences between your answer and the choices given (hint: cash flows are constant in Years 1-3)

WACC 10%
Net investment cost (depreciable basis) $65,000
Straight line depr'n rate 33.33%
Sales revenues $70,000
Operating costs excl. depr'n $25,000
Tax rate 35%

Reference no: EM1339898

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