Foley Systems is considering a new project whose data are shown below. Under the new tax law, the equipment for the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. After the project's 3-year life, the equipment would have zero salvage value. The project would require additional net operating working capital (NOWC) that would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows from operations are constant in Years 1 to 3.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC Equipment cost Required net operating working capital (NOWC) Annual sales revenues Annual operating costs Tax rate O a. $25,213 O b. $45,355 O c. $44,477 O d. $47,685 Oe. $41,742 10.0% $72,500 $11,000 $74,000 $21,000 25.0%
Foley Systems is considering a new project whose data are shown below. Under the new tax law, the equipment for the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. After the project's 3-year life, the equipment would have zero salvage value. The project would require additional net operating working capital (NOWC) that would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows from operations are constant in Years 1 to 3.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC Equipment cost Required net operating working capital (NOWC) Annual sales revenues Annual operating costs Tax rate O a. $25,213 O b. $45,355 O c. $44,477 O d. $47,685 Oe. $41,742 10.0% $72,500 $11,000 $74,000 $21,000 25.0%
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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Transcribed Image Text:Foley Systems is considering a new project whose data are shown below. Under the new tax law, the equipment for the project is eligible for 100% bonus
depreciation, so it will be fully depreciated at t = 0. After the project's 3-year life, the equipment would have zero salvage value. The project would require
additional net operating working capital (NOWC) that would be recovered at the end of the project's life. Revenues and operating costs are expected to be
constant over the project's life. What is the project's NPV? (Hint: Cash flows from operations are constant in Years 1 to 3.) Do not round the intermediate
calculations and round the final answer to the nearest whole number.
WACC
Equipment cost
Required net operating working capital (NOWC)
Annual sales revenues
Annual operating costs
Tax rate
a. $25,213
b. $45,355
c. $44,477
d. $47,685
e. $41,742
10.0%
$72,500
$11,000
$74,000
$21,000
25.0%
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