Gateway Communications is considering a project with an initial fixed assets cost of $1.50 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $245,000. The project will not change sales but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500 In net working capital, which will be recouped when the project ends. 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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**Cash Flows and NPV**

Gateway Communications is considering a project with an initial fixed asset cost of $1.50 million, depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project, the equipment will be sold for an estimated $245,000. The project will not change sales but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500 in net working capital, which will be recouped when the project ends. What is the project's NPV?

**Multiple Choice Options:**

- $133,641
- $176,342
- $182,220
- $169,560
Transcribed Image Text:**Cash Flows and NPV** Gateway Communications is considering a project with an initial fixed asset cost of $1.50 million, depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project, the equipment will be sold for an estimated $245,000. The project will not change sales but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500 in net working capital, which will be recouped when the project ends. What is the project's NPV? **Multiple Choice Options:** - $133,641 - $176,342 - $182,220 - $169,560
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