Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $177,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $114,000, variable costs of $30,100, and fixed costs of $12,400. The project will also require net working capital of $3,000 that will be returned at the end of the project. The company has a tax rate of 35 percent and the project's required return is 8 percent. What is the net present value of this project?
Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $177,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $114,000, variable costs of $30,100, and fixed costs of $12,400. The project will also require net working capital of $3,000 that will be returned at the end of the project. The company has a tax rate of 35 percent and the project's required return is 8 percent. What is the net present value of this project?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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