Gateway Communications is considering a project with an initial fixed assets cost of $1.52 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 $243,000. The project will not change sales but will reduce operating costs by $405,000 per year. The tax rate is 34 percent and the required return is 11.8 percent. The project will require $53,500 in net working capital, which will be recouped when the project ends. What is the project's NPV?
Gateway Communications is considering a project with an initial fixed assets cost of $1.52 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 $243,000. The project will not change sales but will reduce operating costs by $405,000 per year. The tax rate is 34 percent and the required return is 11.8 percent. The project will require $53,500 in net working capital, which will be recouped when the project ends. What is the project's NPV?
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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Gateway Communications is considering a project with an initial fixed assets cost of $1.52 million that will be
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