What is the net present value of the project

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Reference no: EM131245299

Cash flows.

The Cary Company is considering a new investment that costs $10,000. It will last five years and have no salvage value. The project would save $3000 in salaries and wages each year and would be financed with a loan with interest costs of 15% per year and amortization costs (repayment of principal on the loan) of $2000 per year.

If the firms tax rate is 40% and its after-tax cost of capital is 20%, what is the net present value of the project?

[Note: The annuity factor for five years at 20% is 2.991.]

Reference no: EM131245299

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