Explain capital budgeting involves calculation net present

Reference no: EM1312953

Explain Capital budgeting involves calculation of net present value

Foxglove Corp. is faced with an investment project. The following information is associated with this project:
Allowable Depreciation
Year Net Income* for 3-Yr. MACRS class
1 $50,000 0.33
2 60,000 0.45
3 70,000 0.15
4 60,000 0.07

*Assume no interest expenses and a zero tax rate.

The project involves an initial investment of $100,000 in equipment that falls in the 3-year MACRS class and has an estimated salvage value of $15,000. In addition, the company expects an initial increase in net operating working capital of $5,000 which will be recovered in year 4. The cost of capital for the project is 10.5 percent. What is the project's net present value?

Reference no: EM1312953

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