Question

You are evaluating a capital project with a Net Investment of $95,000, which includes an increase in net working capital of $5,000. The project has a life of 9 years with an expected salvage value of $3,000. The project will be depreciated via simplified straight-line depreciation. Revenues are expected to increase by $20,000 per year and operating expenses by $4,000 per year. The firm's marginal tax rate is 40 percent and the cost of capital for this project is 8%. What is the net present value of this project? Round to the nearest penny. Do not include a dollar sign.

Answer 1

YEAR calculation [-95000-5000 ] (20000-4000) *0.6+(95000/9*0.4) Cash flow $100,000 $13,822 $13,822 $13,822 $13,822 $13,822 $13,822 $13,822 $13,822 $20,622 pv @ 8% 1.000 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 discounted cash flows -$100,000.00 $12,798.35 $11,850.33 $10,972.53 $10,159.75 $9,407.17 $8,710.34 $8,065.13 $7,467.72 $10,316.25 -$10,252.43 9 | (20000-4000) *0.6+(95000/9*0.4) +5000+(3000*0.6) NPV