DeVault Services recently hired you as a consultant to help with its capital budgeting process. The company is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. The risk-adjusted cost of capital is 0.103. What is the project's NPV? Risk-adjusted cost of capital 0.103 Net investment cost (depreciable basis) $100,693 Straight-line deprec. rate 33.3333% Sales revenues, each year $95,500 Operating costs (excl. deprec.), each year $43,000 Tax rate 27.0%

DeVault Services recently hired you as a consultant to help with its capital budgeting process. The company is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. The risk-adjusted cost of capital is 0.103. What is the project's NPV? Risk-adjusted cost of capital 0.103 Net investment cost (depreciable basis) $100,693 Straight-line deprec. rate 33.3333% Sales revenues, each year $95,500 Operating costs (excl. deprec.), each year $43,000 Tax rate 27.0%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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