Reference no: EM132055076
NPV, constant CFs, NOWC, salvage value
Stanley Inc. is considering a new investment whose data are shown below. The required equipment has a 3-year tax life and would be fully depreciated by the straight-line method over the 3 years, but it would have a positive salvage value at the end of Year 3, when the project would be closed down. Also, some new net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?
WACC10%
Net equipment cost (depreciable basis) $90,000
Required new NOWC $20,000
Straight line depreciation rate 33.33%
Sales revenues $110,000
Operating costs excluding depreciation $45,000
Expected pretax salvage value $5,000
Tax rate 40%
a. $34,109.69
b. $35,222.36
c. $36,888.50
d. $38,000.00
e. $40,225.15