Reference no: EM132729455

Problem 1: Garden-Grow Products is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that 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 life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.)

Project cost of capital (r)10.0%
Net investment in fixed assets (basis)$75,000
Required new working capital$15,000
Straight-line deprec. rate33.333%
Sales revenues, each year$75,000
Operating costs (excl. deprec.), each year$25,000
Tax rate25.0%

a. $34,809
b. $30,069
c. $33,152
d. $36,550
e. $31,573