A project requires the purchase of machinery for $40,000. The machinery belongs in a 20% CCA class and will have a salvage value of $4,000 at the end of the 4 year project. It will require a net working capital Investment of $2,000 up-front, and the net working capital is recovered at the end of the project. The firm has a tax rate of 35% and a required return of 10%. The project generates annual before-tax sales less cash costs equal to $15,000 in each of years 1 to 4. What is the project's NPV?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A project requires the purchase of machinery for $40,000. The machinery belongs in a 20% CCA class and
will have a salvage value of $4,000 at the end of the 4 year project. It will require a net working capital
Investment of $2,000 up-front, and the net working capital is recovered at the end of the project. The firm has
a tax rate of 35% and a required return of 10%. The project generates annual before-tax sales less cash costs
equal to $15,000 in each of years 1 to 4. What is the project's NPV?
Multiple Choice
$2,124
$8,272
$1,169
5881
$2.942
Transcribed Image Text:A project requires the purchase of machinery for $40,000. The machinery belongs in a 20% CCA class and will have a salvage value of $4,000 at the end of the 4 year project. It will require a net working capital Investment of $2,000 up-front, and the net working capital is recovered at the end of the project. The firm has a tax rate of 35% and a required return of 10%. The project generates annual before-tax sales less cash costs equal to $15,000 in each of years 1 to 4. What is the project's NPV? Multiple Choice $2,124 $8,272 $1,169 5881 $2.942
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