Revenues and other operating costs problem

Reference no: EM13156448

Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a three-year tax life, would be depreciated by the straight-line method over its three-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's three-year life. What is the project's NPV?

Risk-adjusted WACC: 10.0%
Net investment cost (depreciable basis): $65,000
Straight-line deprec. rate: 33.333%
Sales revenues, each year: $65,500
Operating costs (excl. deprec.), each year: $25,000
Tax rate: 35.0%

a. $15,740

b. $16,569

c. $17,441

d. $18,359

e. $19,325

Reference no: EM13156448

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