What is the project npv

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Reference no: EM133035421

Problem:

Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new office. The equipment for the project would be depreciated by the straight-line method over the project's 3-year life, after which it would be worth nothing and thus it would have a zero salvage value. No change in net operating working capital would be required, and revenues and other operating costs would be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) Do not round the intermediate calculations and round the final answer to the nearest whole number.

WACC

10.0%

Opportunity cost

$100,000

Net equipment cost (depreciable basis)

$65,000

Straight-line depr. rate for equipment

33.333%

Annual sales revenues

$128,000

Annual operating costs (excl. depr.)

$25,000

Tax rate

35%

a. $21,575

 b. $22,592

c. $21,168

d. $20,353

e. $17,707

Reference no: EM133035421

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