Considering new project-net present value of the project

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Reference no: EM13813380

Lucky Inc is considering a new project. The project will generate revenues of $16 million and operating costs of $9,000,000 annually for the next 5 years. Interest expense is $1,000,000 per year. It requires an additional machine that costs $15 million dollars and will be fully depreciated (to a zero book value) on a straight-line basis over 5 years. The machine has a salvage value of $2,000,000. Lucky Inc's tax rate is 30%. The beta of the project is 1.10. The risk-free return is 5% and the return on the market is 15%. What is the net present value of the project?

Reference no: EM13813380

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