Reference no: EM132894016

Problem 1: 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 three-year life, after which it would be worth nothing, and thus it would have a zero salvage value. No new working capital would be required, and revenues and other operating costs would be constant over the project's three-year life. What is the project's NPV? (Hint: Cash flows are constant in years 1-3.) WACC 10%, Opportunity Cost 100,000, Net equipment cost 65,000, Straightline dept. the rate for equipment 33.33%, Annual sales revenue 128,000, Annual operating costs 25,000, Tax rate 35%.