Reference no: EM13540735

Green Monstah Landscaping Corp. is considering some new equipment whose data are shown below. THe equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the equipment would be sold. Also, additional 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?

WACC: 5.5%
Net investment in fixed assets (depreciable basis): $9,000
Required net operating working capital: $300
Straight-line depreciation for 3 years
Annual sales revenues: $10,000
Annual operating costs (excluding depreciation): $1,000
Expected sale price: $2,000
Tax rate: 35%