Gateway Communications is considering a project with an initial fixed assets cost of $1.55million that will be depreciated straight-line to a zero book value over the 9-year life ofthe project. At the end of the project the equipment will be sold for an estimated $240,000. The project will not change sales but will reduce operating costs by $399,000 peryear. The tax rate is 21 percent and the required return is 11.5 percent. The project willrequire $52,000 in net working capital, which will be recouped when the project ends.What is the project's NPV?

Net present value evaluates the worthiness of the project by taking the difference between the…

Answered: Gateway Communications is considering a…

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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