The cost of capital for the project

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Reference no: EM131548967

Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 270,000 dollars today. The equipment would be depreciated straight-line to 20,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 27,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 194,000 dollars and relevant costs are expected to be 89,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 6.75 percent. What is the NPV of the project?

Reference no: EM131548967

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